Making $7K/Month in PURE Cash Flow with Only 3 Rental Properties

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Many people buy rental properties for the cash flow, but today’s guest took it to another level—dropping out of college to go all-in on real estate investing. Find out how he brings in several thousand dollars of profit each month and how YOU can replicate his investing strategy!

Welcome back to the Real Estate Rookie podcast! Like many new investors, Bailey Kramer started out small—converting long-term rentals into Airbnbs and co-hosting these properties for someone else. After seeing how much money this investor was raking in, Bailey decided that he wanted his own piece of the short-term rental pie. Within eighteen months, he had built his own small portfolio with a focus on cash flow. Today, his three properties bring in a total of $7,000 each month in addition to all of his co-hosting profits!

Tune in as Bailey delivers the blueprint he uses to maximize his cash flow. The best part? This strategy is EASY to implement, whether you’re investing in your own backyard or another market entirely. We also get into DSCR (debt service coverage ratio) loans, how to build an out-of-state investing team, and the method Bailey uses to find the perfect neighborhoods to invest in!

Tony:
This is Real Estate Rookie Show 381. Today we’re going to learn how to buy properties for cashflow and creative methods to make sure your properties will cashflow without ever seeing them in person. Now guys, my name’s Sony j Robinson. I’m your host today for the Real Estate Rookie Podcast and welcome to the Real Estate Rookie podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Today we’ve got Bailey Kramer, who’s an investor investing out of state with an emphasis on cashflow, and Bailey has a strategy that every Ricky can replicate for themselves. So Bailey, welcome to the Real Estate Rookie podcast. Super excited to have you on, brother.

Bailey:
Thanks, Tony. Pumped to be here.

Tony:
Yeah, man. So dude, you’ve got a really interesting story and I want to get into how you’ve built it, what those strategies were. But first, before we dive in, can you just set the table for the rookie audience, what does your portfolio look like today and over what timeframe did you build that portfolio?

Bailey:
Totally. So today I own three properties. Two of them are single family homes, and the third one is a triplex. So that’s kind of my portfolio right now. And then I bought the first one in that portfolio in October of 2022.

Tony:
2022, man. So we’re talking a little over a year that you’ve been building this portfolio. We’re reporting this in February of 2024, man, so you’re crushing it, brother, and just tease it a little bit, man. But from a cashflow perspective, with just these three properties, ballpark, what are you bringing in every month? Yeah,

Bailey:
Just these three properties. Ballpark around 7,000 per month profit cashflow.

Tony:
Dude, you’re saying that real calm, cool, and collective, but seven K per month to do that in what? A year and a half. That’s amazing, man. So kudos and congratulations to you. So maybe the best place for us to start, Bailey, is I guess maybe tell me, right? You said you’ve got three properties, you’re in a couple of different markets. What markets are you in and how did you choose those markets to begin with? For

Bailey:
Sure. So I’m in the Midwest, I’m in Indiana specifically, and there’s two specific cities that I’m in. So one of ’em is called Terre Haute, Indiana, and one of them is called Kokomo Indiana. And the way that I actually found these markets is I was actually co-hosting, so I was co-hosting Airbnbs, and I got referred to a guy who lived in California who had long-term rentals in this random city, Terre Haute that I’ve never heard of in my life, because I lived in Florida at the time, lived in Wisconsin, but had no correlation to Indiana. But he said, Hey, can you help me turn my long-term rentals into short-term rentals? So that’s how I discovered the market.

Tony:
Dude, funny enough, one of my early offers that I put in when I started investing back in 2018, it was on a small multifamily in Terre Haute, Indiana. That’s funny. My business partner at the time, he had a family member who owned a business in Terre Haute, same thing, I’d never heard of it before either, but the numbers actually, they look pretty good. Just that specific deal, they didn’t work out whether, so you were in Florida, south Florida at the time, you land on this random city in Indiana and it’s because of relationship that you have. And you said that it was a co-hosting business. So we’ve had some recent episodes on co-hosting, so no need to go super deep into that rapid hole. But maybe for folks that aren’t familiar with that phrase, Bailey, what exactly is co-hosting?

Bailey:
Yeah, essentially it’s managing Airbnb’s for owners. So I was basically handling the day-to-day operations, communicating with guests, handling pricing, controlling the Airbnb listing, stuff like that for an owner.

Tony:
So this owner says, Hey dude, I’ve got some properties in this random city in Indiana. I know you know nothing about this place, but I want you to turn my long-term rentals into short-term. And I guess how did that co-hosting in that market lead into you buying actual property of your own in that city?

Bailey:
Yeah, so this investor, he owned, I dunno, 10, 15 long-term rentals, something like that. So at first he just gave me one and he’s like, all right, let’s just try this one out. And then we furnished it, we got it up and live and it was doing super well. And then he’s like, Hey, tenants moving out of my second, another long-term rental. Let me throw you another one, see if it’s still working. So we do the second one, then the third one happens, and then that’s where I made the shift to say, holy smokes, this guy’s doing so well with these long-term rentals that he is turned into short-term rentals. I want to get a little piece or really a big piece and actually own a property there as well.

Tony:
Let me ask one question, man, because this is something that I’ve been trying to preach for the last couple of years here as it relates to the Airbnb space. There’s a talk of the bust, and there definitely are cities across the country who have seen revenues come down from their sky high 20 21, 20 22 levels, Josh, who we own a lot of property out there, that market is cooled pretty significantly, but there are other markets that are doing just fine. Like our ties in Tennessee, you couldn’t tell the difference between 2023 and 2022, right, right. Terre Haute, Indiana, probably not on anyone’s list of prime time vacation destination. So what is it that’s really pulling people into that market to even make short-term? I think viable.

Bailey:
Totally. That’s actually funny that you mentioned that because I talked to family and friends and other people and I’m like, yeah, Terre Haute, and they’re like, dude, who’s coming to Ute? What? So what I’m doing more so now too is on the midterm side, so insurance companies, travel nurses, stuff like that, but in between those longer stays, we just got a booking today, unfortunately someone’s coming in for a funeral. We have people visiting for the holidays, we have construction crews coming in, so no one’s really vacationing here. This is not your glamorous Airbnb in Joshua Tree, but where there’s people, there’s people that need places to stay.

Tony:
So you start off with this co-hosting business which pulls you into Terre Haute, then you start seeing the numbers that this owner’s doing. I guess what else did you see anything else in that market, Bailey, that made you say, okay, this is actually a place that I want to start building my own portfolio?

Bailey:
Really the biggest thing besides the fact that I saw success from him was the fact that his place was always occupied. We didn’t have any gaps in his bookings when we were first getting going. So I was like, holy smokes, there’s more demand than what we have for the supply. So that was really the biggest indicator to

Tony:
Me, and I think that’s a big thing that you touched on is the relationship between supply and demand. And there are a lot of people who don’t really understand how important that relationship is, but if you can find a city where there’s strong demand but limited supply, now you can come in, add a few additional units, and you can kind of scoop that demand up pretty quickly. Now is there anything else I guess that’s kind of drawn people into the town? You talked about construction workers, talked about traveling nurses. Is there any other happenings in Terre Haute that might pull someone in for a couple nights?

Bailey:
Yeah, they just built a brand new casino, so that was a pretty big project for the city. There’s a university here, so Indiana State University is literally two blocks away from my property right now. There’s some manufacturing stuff here, but nothing glamorous that would be like, oh my god, this is a steal. Nothing crazy,

Tony:
But you got a big university there, which is probably something to be happy that’s in that city because colleges, they have their own kind of local ecosystem they start to build and you can benefit from that. Now, dude, something I want to go back to because you mentioned this up top is that you’re cash flowing $7,000 per month from three properties, which is pretty fantastic. So I definitely want to get into kind of what your ethos is, what your strategy is really maximizing the revenue from these properties. But first we’ll take a quick break so we can hear a word from our show sponsors. Alright, Bailey, we are back into, man, I’m super excited to get into your story because we talked about how you landed on this random city in Indiana. We talked about how your cash flow multiple four figures from one property. So walk me through what exactly is your investing ethos, your investing methodology, because you’ve got a mix of the co-hosting the stuff that you own, but just big picture, what does that look like for you?

Bailey:
Yeah, big picture right now is all about cashflow. To me, cashflow is the only thing that I’m personally focusing on right now. I know there’s two cashflow, there’s appreciation right now at 23 years old, I’m keeping my head steady to just focus in on maximizing cashflow now and then future going forward might adjust and make some more appreciation plays. But yeah, right now my focus is all cashflow.

Tony:
And I always talk about this, that when folks get into real estate investing, everyone has their different motivations and there’s three big motivations. I typically see four if you want to include short-term rentals, but the three big ones, you have cashflow, you have appreciation, you have the tax benefits, and then if you’re doing short-term, you’ve got the vacation piece as well. Rather people just want to subsidize the cost of their own vacation homes, but cashflow, appreciation, taxes and vacations. And people always ask me, Tony, what’s the best kind of property for me to buy? Or what’s the best city for me to buy in? Or what’s the best fill in the blank. And my answer is always, well, it depends and it depends on what your motivations are. And for you bay to say, look, I’m in my early twenties, I’m not as focused about building my retirement portfolio for 20 years from now. I just want to build cashflow so I can survive and free up some of my time freedom, then your investment strategy is going to be very different than the doctor or the lawyer or the CFO that’s more so concerned about I got to offset my taxes for my day job. Totally. So I’m happy that you’re focusing or highlighting the fact that every investor has different motivations there. So you’ve got your own portfolio, which is putting off, you said about seven K per month. Ballpark, what are you making from your co-hosting business

Bailey:
Co-hosting ranges on the month. Some of the properties I have are super seasonal, but between five and 10,000 per month,

Tony:
Dude. So on a good month you’re talking about $17,000 a month in cashflow coming in from your real estate business and you’ve done this in a year and a half.

Bailey:
So the owning piece has been a year and a half roughly. And then the co-hosting piece, I’d say has been closer to maybe three-ish years.

Tony:
Gotcha. Well, you just lost all credibility, man. It actually took you three years to get even in three years, even in three years, that’s like an amazing accomplishment. People, they’ll work a day job for decades and never get to $17,000 a month in any kind of income. So the fact that you’ve been able to do this in three years is pretty impressive. So I want to talk a little bit about maybe breaking down one of the deals that you’ve actually purchased, if you’re okay with that. Maybe let’s talk about the co-hosting piece first. Bailey, if you’re okay with that. And the reason I want to start there is because one of the beauties of co-hosting is that there’s pretty much no capital needed to get started with this business model. You’re just taking over someone else’s property. How you mentioned this guy already had 15 single family homes and he just handed them to you and said, Hey, help me turn these into short term. So how did you get that first co-hosting deal, especially since you didn’t necessarily have a short-term rental of your own to begin with?

Bailey:
Totally. So taking it back to the college days, so I’m 23 now, so college only a couple years ago, but when I was 19 or 21 of the two, I went on this huge rampage just trying to meet as many people in the real estate world as humanly possible because at the time I knew I was interested in it from listening to the BiggerPockets podcast, rich Dad ported, but I had no one that I knew in the game. So basically just started networking with a ton of people. Fast forward, I ended up actually meeting some guys. This was kind of covid time, so met them through Zoom and went down this big rabbit hole, ended up partnering with a handful of guys on a property. So my first six properties I bought and have since sold started when I was really 19, 19, 20, and then sold those. But long story short, two of the properties I bought with this group of guys were short-term rentals. So I had some knowledge at the time and some experience from just running these properties. So that transition into that first property was really from me just documenting some stuff on social media, showing people what I was doing, and then someone reached out and said, Hey, I know somebody who’s looking for someone to co-host their Airbnb. So that’s kind of how that first one came about.

Tony:
Yeah, I love that, man. It’s about documenting your journey and sharing with people like, Hey, here’s what I’m working on. Here’s what I’m trying to be good at. And a lot of times people just raise their hands and say, I like you. I like your vibe, I like your personality. Seem like a good person to work with. One thing that’s coming to mind for me, man, because you mentioned a couple of times that you’re 23 years old at 23 years old to be making on a good month, $17,000 per month. Have you bought in your first Rolex, you got a sky high condo in downtown? Is it difficult to not let the lifestyle inflation kind of happen when you’ve got so much cashflow coming in?

Bailey:
So I made one purchase, which was a Tesla. I got some good tax benefits from it too. But besides that, I’m super, especially now after I think it was good for me to buy one thing, the car to okay, now I’ve gotten the kind of, I kind of felt like, not that I had to, but it scratched

Tony:
The itch, right?

Bailey:
Yeah. It scratched the itch, it felt right. And then now I’m like, okay, I’m literally just continuing to throw back in now that I have the car, nothing else really excited. It’s me. Besides real estate, I get way more excited buying furniture for my properties than buying anything else.

Tony:
Cool. So Bailey, I’d love to hear about the first property that you purchased for yourself, which I think was a single family, short term slash midterm in Kokomo, Indiana. So give us a backstory on that one.

Bailey:
Yeah, so like I mentioned before, this city, Terre Haute, Indiana was this market that I found from this investor that I was coasting for. So I was looking in that market to find properties that made sense, but nothing was really a home run deal per se. I was looking, looking, looking. And then after, I dunno, probably a couple weeks, I was like, okay, let me look in one or two more markets because I want to get something going sooner than later. What I did is I looked up all the city metrics of Terre Haute, so it was population I looked at, okay, what cities in Indiana have a similar population? What cities in Indiana have popular home prices, average salaries of the people, average poverty rates, just like those basic similarities between the cities. I looked that up and what I found is the city of Kokomo that you mentioned, which I started doing the same type of research looking for properties in Kokomo as well. So that’s how I landed on Kokomo.

Tony:
One follow up question there, Bailey, how were you finding all this data? What data source were you using to look up salary, property rate, population, home prices, et cetera?

Bailey:
I was literally just Googling it, so I’d just be average salary in and then the city name. And what I did at first though is I looked up because I knew I didn’t want a city of 500 people. I wasn’t looking to in the tiniest market ever. So what I did first was I looked up biggest cities in Indiana, so top 20 or 30 or whatever. So I went to number one, the number two, the number three. So I was average income in here, average home value in blank city. And then I was like, okay, average price in the city at 400,000, that’s not going to work. So then I kind of kept going down the line until it matched up with Terre Haute or close to possible.

Tony:
Yeah, I love that approach, man, because I think a lot of people overcomplicate the market selection piece and understandably so because there’s 19,000 cities in the United States and sometimes getting down to the two or three that you should be focusing on, it can be overwhelming. But when you’ve got a super clear framework that you want to follow, it removes a lot of that confusion and ambiguity because you’re like, Hey, I’ve got a city that I know works well, let me just find another city that mimics this city and all those important data points. So man, I love the idea of saying, Hey, biggest city in Indiana going from top to bottom and stopping until you find the right one. So you do all this data you find Kokomo, Indiana. I guess walk us through the numbers on that first property, the traction of closing on out there. Yeah,

Bailey:
So first property, I bought it for 115,000. It was three bedrooms, one bathroom. I got an eight and 5% interest rate, which scared every friend and family member that I ever told. And it was just A-D-S-C-R loan as well.

Tony:
First we got to just appreciate the fact that you bought a property for $115,000 because I’m in Southern California. That might get you, I don’t even think you can get a garage in California, $415,000 right now. So you said that you use A-D-S-C-R loan at an 8.5% interest rate. What exactly is A-D-S-C-R loan and why did you choose to go that route?

Bailey:
Yeah, so DSCR loan, it stands for debt service. Debt service coverage ratio Loan is essentially a loan where they don’t check your tax returns. There’s a bunch of other things to it, but it’s a type of loan where if you don’t have the best record to show the bank, then I think a DSR loan is great. So for me, I recently dropped out of college from this property, so if I went to the bank and said, Hey, I have been running this co-hosting business for a couple months, do you want to give me a mortgage? They would’ve probably laughed at me. DSDR loan, they don’t check that. They check your credit score and then the property itself to make sure that that’ll cashflow, but they don’t necessarily check as much about you as the borrower.

Tony:
There’s different types of DSCR loan products. Bailey, for the one that you used when they were projecting the income for the property, were they looking at it from a long-term rental perspective or were they looking at it from a short-term rental perspective? And just to preface that before you answer, the reason why that’s important is because you get some lenders who will give you the DSCR loan product, but they’ll only take in the long-term rental income, which depending on the property, could be a fraction of what that property will actually do as a short term. Then it limits your ability to get approved there. So for you, were they looking at it from a short-term or a long-term perspective?

Bailey:
So they were looking at it from a long-term perspective. So they just said, okay, does this make sense as a long-term rental? And when they came back with what a long-term rental would actually run for, they actually came back with their number lower than what it should have been. So I was like, hold on. I had my realtor pull the comps, sent it over and said, guys, you guys are about two to $300 off here. I can rent it for X amount all day long. And then they were able to move it along.

Tony:
Where did you find this lender?

Bailey:
Google. Literally, I went on Google, I just started calling people. I first looked up different loans to get if you don’t have any tax returns and this and that because, well, at first I called lenders who were like, do you have three years tax returns and a W2 job and this and this and that? And I’m like, no, no, no, no, no. And then they were like, you have anyone who can co-sign for you? And I’m like, no. So then I got a bunch of no’s from that, and then I started just honestly doing research on Google, like how to get a loan if you are X, Y, Z. And then I saw this DICR thing. So then I looked up DSCR lenders, and then I went through that list and called a bunch of those lenders as well. Half of them don’t answer their phone. The other half, 90% told me I couldn’t do it for whatever reason. But finally narrowed it down to someone who said, yeah, we can do it. It’s going to be at an eight and a half percent interest rate, but we can do it for

Tony:
You. And how many people do you think you spoke with, or how many contacts do you think you reached out to you during this process, Bailey, and just how much time did it take you in general to find that right lender?

Bailey:
Yeah, I mean, I’d say I’d probably called close to 25. Realistically, I would say out of the 25 I called, maybe 18 didn’t even answer my phone. And then I probably actually had conversations with about probably seven of them to be realistic.

Tony:
And over what timeframe was that?

Bailey:
Honestly, I don’t know, maybe couple days of just calling. And I think I started to do this before I even had the deal too, just to kind of get the feelers out there, but I didn’t keep great records of who I called. So I’m like, oh shoot, I just looked up this company. Did I already call ’em? I don’t know.

Tony:
Right. Yeah. But I think the reason I ask that question, Bailey, is because it just goes to show me that you didn’t take that first. No, as the end all be all, and you kept going until you found the answer that you were looking for. And I think that’s where a lot of Ricky investors get caught up or they get stuck, is that they take that first no, as the only potential answer, the only potential solution. But there are so many different lenders out there and each one’s going to approach the same situation from a slightly different perspective. So I think the million dollar question, Bailey, is what was the name of the lender that you used that was able to get this super awesome Dscr R loan product for you?

Bailey:
The lender is called Offer Market Us. So offer Market us. I don’t have any affiliation with them, but it’s just who I use and they’re super easy to get in contact with

Tony:
Offer Market us, never heard of them in my life, but just goes to show how many lenders are out there. So eight and a half percent interest rate. What was your down payment on the property

Bailey:
Now? This one was 30%, which was not fun. Gotcha.

Tony:
Yeah, but still, man, it got you in the game. And what ballpark, Bailey, what was your cashflow after that first year on $115,000 purchase price?

Bailey:
My cashflow was roughly $18,000 cashflow profit to me. So it was about a between 40 and 45% cash on cash return.

Tony:
Dude, $18,000 on a $115,000 purchase price profit is insane. So man, congratulations brother. So I want to touch on a few of your other properties here, Bailey, because I know obviously you’ve closed on a few after this first one here. And I know you also have a method called the reverse review method. I definitely want to figure out what exactly that is and how you’re using it. But first we’re going to take a quick break to hear a word from our show sponsors. Alright, we are back here with Bailey who said he just cash flowed $18,000 on a $115,000 purchase price for a property out in Indiana. Now Bailey, I want to talk a little bit about out your reverse review method, which I think is super interesting. But before we touch on that, I want to know what kind of gave you the confidence to purchase out of state?
Because you said when you started the first business, you were southern Florida, and then you said you bounced around to other parts of the country as well. Now you’re in North Carolina, outside of Raleigh. So a lot of rookies that are listening, I think they’re nervous to buy out of state and they just have this feeling inside of them. It’s like, no, I got to be close. I got to be able to walk the property. I got to be able to be there if something goes wrong. What gave you the confidence to buy out of state, to build your business out of state, to buy out of state in general?

Bailey:
So investing out of state, I think a lot of times people get nervous like what if X, Y, Z happens? A lot of times the X, Y, Z is like, what if something breaks? And for me personally, I try to be handy, but I’m not handy. I can’t fix most things besides maybe putting some furniture together. I can do that, but I’m not a plumber. I’m not an HVAC guy. So for me, I just realized that I could figure it out, I could learn it, but I don’t really want to be honest. So I realized that I just need to rely on other people who are better than me at that to do it. So that was the first main piece. The second main piece was I knew I was limited on capital and I knew, again from this market that I was co-hosting in, I saw a track record there. So I was like, okay, I have the money that can perform in that market. I’d way rather do that than wait a whole nother year, save up more money and then invest in some big name market just for the sake of it. So those were the two big things for me.

Tony:
I say this all the time and I couldn’t agree with you more. Bailey, and I say this all the time, it’s like for that investor who’s looking to buy that first real estate investment and say they’re doing it out of state, maybe side unseen, they most likely are going to send their real estate agents to go walk to property first, right? biggerpockets.com/agent finder, you’ll find a great real estate agent who’s going to advocate for you. You’ll have a property inspection done. So someone who for a living walks through properties to identify what the potential issues are. If you have maybe a bigger rehab job or you need some kind of rehab work done, maybe have a handyman or a general contractor walk the job as well. So when you zoom it out like that, you’ve got a realtor who knows the market incredibly well. You’ve got a property inspector who literally looks for problems for a living who’s going to give you a super detailed report, and then you’ll have maybe a handyman or a contractor write up a bid for you on what it’ll cost to fix whatever issues might persist.
If you’ve never done a real estate deal before, how much value can you add on top of the realtor on top of the property inspector, on top of the general contractor? It’s just going to make you feel better because you saw it with your own eyes, but you’re not even really going to know what you’re looking at. So when I frame it that way, people always kind of laugh like how you are? And you’re like, yeah, Tony, I guess you’re right. So for every Ricky that’s listening, lean on your team like Bailey said. So I guess the question that I’d ask next then, Bailey, is how did you build that team to give you the confidence to be able to do this remotely? Yeah,

Bailey:
That’s so true. The way I built my team, I guess it started with the realtors really. So I would just, whenever I saw a property for sale, I’d call the listing agent and the ones who were super responsive, the ones who would give me information, the ones who would just talk with me were the ones that I would kind of get to know and talk with, and then I’d ask them for their recommendations. So I’d say, Hey, by the way, who do you recommend for an inspector? Who do you recommend for a handyman? And then I kind of went down that rabbit hole for most of my top people, just getting recommendations from my other people. The other thing I’ll do is again, just go on Google, look for the people with good reviews and just call ’em. But I would say literally just calling these real estate agents, letting them know, Hey, I’m out of state. This is kind of my situation. You’ll be able to see really fast which agents are going to actually put in the work for you and what agents are not going to say it lightly.

Tony:
Again, biggerpockets.com/agent finder guys, you’ll find agents that know how to work with real estate investors. And for someone that’s just getting started, having that agent who knows that market really well is a really, really important part to being able to do this remotely. But I want to ask you about the reverse review method. What the heck is that? How are you using in your business? And just break it down for the Ricky audience.

Bailey:
Totally. So this is my biggest hack, I’d say, for the way that I’m able to find these places remotely. Again, I don’t understand how if this is a good street and if this is a safe area and this and that. So this works for short-term rentals, a hundred percent midterm rentals, a hundred percent. You can also apply this to a lot of concerns that people have about long-term rentals too. But what I do is, and sometimes the property comes first, sometimes the area comes first, vice versa. But what I do is I go on Airbnb, let’s just say I find a property for sale, like the most recent one that I bought, I saw it listed for sale. So I said, okay, I don’t know anything about that area. This is the northern part of town. I have only experience in the southern part of town.
So what I did is I went on Airbnb and I looked at properties that were close to this one. There’s Airbnbs everywhere. That’s the beauty of it too, is most places you’re looking, there’s probably already an Airbnb nearby, which is good because what you can do from then is read their reviews. People are so honest on those reviews and especially on things that they don’t like. So if they say sketchy area, stay away, and you say they have a two star rating on the location part of the Airbnb review and you see it over and over again, it’s probably a sketchy area. But on the flip side, if people are raving about the area walkable to great coffee shops, felt great, whatever people are writing, and they’re all positive reviews talking about the location, well, you could have some assurance there that, okay, that’s going to be a good location if you’re going to buy the property next door to that.

Tony:
I love that approach and I’ve definitely tried to advocate for the fact that there’s a lot of golden information in the Airbnb reviews because you can pick up on things or at least get a sense of what’s important to guests in that market if you’re not super familiar with that market already. So man, so you, you’re basically letting your guest or your future guest tell you what part of the city you should be buying your Airbnb. Am I understanding that correctly?

Bailey:
Exactly. And then another bonus thing on top of that is when you read the reviews, some people will say in there, came in town for X, came in town for Y. So then you can start to see y people are actually coming into the area outside of the reasons that you would kind of typically think in whatever market it is. There’s some people who will write just one word and you won’t get anything from it. There’s plenty of people and there’s plenty of listings in literally every market that I’ve ever seen that plenty of information in those reviews.

Tony:
So it sounds like your first deal was an absolute home run. You crush it from top to bottom. How did the second deal go for you?

Bailey:
Second deal was bittersweet. A lot of lessons learned. I called it my failed. My failed bur Airbnb found a property, and this one was literally a block away from a property that I co-hosted in Terre Haute. So I was like, okay, location check, property size. It was three bedrooms, two bathrooms, and we already had people asking for more because we had one bathroom properties, and the first one at Kokomo I bought was one bathroom. So this one was two bathrooms. I’m like, property size is perfect, location’s perfect. It was all great. And the property, I bought it for $65,000 and the plan was, okay, I’m going to put in 30 5K to renovate the thing and it’s going to be worth 1 25 all day long. No questions to ask. It’ll probably be worth more, but that’s what I said. So finally got through the rehab, which had its own bumps in the road, and the appraiser came back at, I think it was $105,000. So I had to put in with the lender, I had to come up with, it was like 22,000 bucks out of pocket at closing at a deal that I thought I was going to have no money out of pocket for. So that was the biggest downside to the deal.

Tony:
What do you think was the gap on the appraisal? Was it when you were doing your initial estimation, did you use maybe the wrong prop? What exactly do you think went wrong on your estimation?

Bailey:
I think there was a couple things. The first thing is the realtor that I used, she told me it wasn’t going to appraise for 1 25, and I was like, you’re wrong. It’s going to, it’s kind of like everyone thinks that there’s stuff just better. You kind of just have that thing in your head talking and you’re like, oh, it’s going to be great. So I didn’t listen to my realtor’s advice, so that was my fault. And then the appraisal too, I do think that they used some comps that weren’t the best, but when I called the lender up, I said, Hey, just got the appraisal back. Come on. Do you see these comps? This one’s three miles west and in the middle of nowhere that’s not even close. And they were like, we kind of agree with you. We do think it could be a little bit higher, so your option is you can get another appraiser appraisal and we can do average the two out. And I was like, eh, at that point to move it up 5,000 and get 2000 and then pay a thousand dollars, it wasn’t worth it at that point. So I’d say it was my fault though, at the end of the day, I should have listened to the realtor or at that maybe asked another realtor’s advice on what they think the appraisal could have been. Got another opinion on it.

Tony:
It is tricky. We’ve had some appraisals come back lower than we wanted as well, and there were a few times where we did challenge the appraisal or even change lenders for one of our deals because we really felt firmly on what we felt that property was worth. And we’ve been successful. Luckily, I think most of the times we challenge, I can think of one where we knew we were kind of stretching a little bit like you were, but still 22,000 in for this deal is still not a bad down payment. And how is that your failed, you call it your bur Airbnb? My

Bailey:
Failed bur Airbnb.

Tony:
Airbnb. How is that property performing for you

Bailey:
Performing super well. So we have a insurance company who’s renting that property, and they keep on extending, they keep on extending keep on extending, which is obviously great for me, and they’re paying $3,500 per month.

Tony:
Wow. So let’s pause on that piece, Bailey, because I feel like there’s a huge opportunity there that maybe doesn’t get talked about enough. What do you mean when you say you have an insurance company renting your three bedroom, two bath and Terre Haute? Is there a board that you posted on that it’s just insurance companies looking for, is the insurance company using it for their employees? What is their use for? Just kind of walk us through the entire process.

Bailey:
So the most simple form of this is let’s just say a family in town, their house catches on fire, or maybe they have a huge flood, their pipes burst and they need to renovate, maybe a tree falls on it. What actually happened for this one? So a tree fell in this person’s house, so they needed to essentially rebuild their house. So they go to their insurance company and say, Hey, insurance company, we don’t want to pay for this house to be rebuilt. So that’s part of their homeowner’s insurance. Another piece of their homeowner’s insurance is if a catastrophic event, like a tree falling, whatever, all that happens, the insurance company will pay for that family to live somewhere else while their house is being fixed up. So that’s what I mean by insurance company. That was the situation with this property.

Tony:
So just to clarify, issue happens at someone’s primary residence insurance company then covers the cost for them to live somewhere else while they’re repairing the primary residence and these people are renting from you and then allowing these families to move in. Exactly. So again, million dollar question here, Bailey, is how the heck are you finding these insurance companies to build these relationships with?

Bailey:
Yeah, so the number one biggest thing that’s way overlooked when it comes to the insurance piece is not about who’s the special person to finding them. Because we’ve gotten several bookings, literally straight through Airbnb for eight to $10,000 per month from insurance companies. So there are some pieces of it that’s important and you can be active with it, but the biggest thing out of it all is your property needs to be available for these families. So if you put yourself in these family shoes, they’re not planning for the fire, the flood, the tree to fall in their house. Let’s just say that happens to somebody, knock on wood today, unfortunately we live in a big country, it’s going to happen to someone somewhere. Unfortunately, they need a place to stay ASAP, and they need a place to stay for at least three months, depending on what happens, maybe even longer.
So if you go on Airbnb and you type in stay for starting tomorrow, let’s just say for three months, there’s not a lot of properties that are going to pop up because what a lot of hosts do is they take these small little weekend bookings a month in advance, two months in advance, maybe a week long booking three months in advance. So their properties aren’t even available. Let’s just say someone only has two days booked in the next three months. Well, too bad because your property is not available for this family. So it’s kind of counterintuitive, but the way to get these bookings is first to have an open calendar. And it sounds kind of scary and like, whoa, you don’t want an empty calendar. But truthfully speaking, that is the main hack to actually getting these bookings.

Tony:
So let me ask this question then, Bailey, are the majority of your bookings coming directly through Airbnb for these insurance relationships, or do you have a Rolodex of people that work at these insurance companies that you’re manually reaching out to? And if so, how did you build that Rolodex, that list of people?

Bailey:
Yeah, so the first one that came in was through Airbnb, but I’d say about 30 to 45% roughly is from Airbnb. The other whatever percentage, I’m not good at the mental math. What other, the majority of it though is number one through Furnish Finder. So what happens is now we list our property on Furnish Finder, and then insurance companies will reach out that way. And then what I’ve done is it’s kind of snowballed from Furnace Finder. So I got a reservation, I got an insurance company to reach out through Furnish Finder, and then they ended up staying at our property. So then I said, Hey, by the way, I emailed them and said, Hey, by the way, do you guys have any other families looking for any other properties in this area? And what happened there is she forwarded the email to her entire team all of a sudden and or BCC’d me or whatever it’s called on that email, I now had 10 to 15 emails that I gathered in one big swoop.
I kind of repeat that process a lot. Again, get an inquiry on Furnished Finder. I’m like, oh, this is a cool company. For example, a LE Solutions, United Corporate Housing, THC housing. There’s so many of these little ones and bigger ones popping up, but whoever reaches out to me, I’ll send them an email. Usually on a weekly or biweekly basis, I’ll say, Hey, love working with you here. Do you guys have any other families that are in need in these places? And then again, they’ll forward it. I’ll grab the emails and pretty much just rinse and repeat.

Tony:
So you’re almost using Finder as a lead source, not only just necessarily for the bookings themselves, but to I guess get in with these insurance companies and identify who the people are that are actually creating these bookings on behalf of their insurance clients?

Bailey:
Yep, exactly. And then we even get some on Airbnb who will say, Hey, I’m from X, Y, Z company, and then I’ll do the same thing or I’ll reach out to that company. And then one other note to put on top is each company has their own internal database of properties. So a LE Solutions, like I mentioned, United Corporate Housing, all these companies, if you go on any other websites, there’s a place that says Property Owner or something like that, or Register Your House. So we literally just put all of our properties also in their database, so that way we have multiple different touch points with them to get access to these renters.

Tony:
And Bailey, we will have you maybe give that list to our producer, so we can put in the show notes of this episode of these different websites where you’re listing to everything. But two other follow questions, and I want to get into your third deal, the triplex you got. But before we do two other questions for you. First question, is there a way to maybe understand what demand might look like from these companies? Is there a way to search for that or is it just as they kind of come across your listing on furnished fund or whatever it is you’re taking it that way?

Bailey:
Yeah, there’s not really a way to know that demand, because again, no one really knows when their house is going to get damaged. But on the flip side, you are able to tell the supply by going on Airbnb because typically a family is not going to really move in a day after their flood. Usually, from what I’ve seen, the insurance company will put them in a hotel for one to seven days just to quick solution. So then you could say to yourself, okay, go on Airbnb, put in your city and put in, okay, starting in seven days for three months and see how many properties pop up. And some of the markets I’m in, you’ll see literally zero options available, maybe one. And those are usually my listings that are the only ones available. So that’s probably the biggest way to tell the supply demand unfortunately, or kind of fortunately, you can’t really know when that’s going to happen to somebody.

Tony:
One follow up to that Bailey is I get the idea of leaving your calendar open. So then are you setting a minimum to say, I’m only taking three month bookings, or do you like, Hey, if I’m a week out, then I’ll let someone come for a night or two? How are you balancing that?

Bailey:
Yeah, exactly. So I’ll do, depending on how many properties I have available, I’ll do between seven and 14 days out. I’ll take a two night, I’ll take a three night, I’ll take a four night reservation. If I only have one property available and the others are booked, I’m going to stay pretty firm and maybe just take us within five or seven days. But yeah, I’ll take these shorter stays. The one that we got today was, again, unfortunately someone coming in for a funeral and they’re coming in starting tomorrow for five days. So great. We’re going to get these smaller bookings and then wait for these bigger pops from the insurance companies.

Tony:
Last question I have before we jump onto your third property here, Bailey, is tips and tricks to maybe stand out on Furnish Finder? Because I know Furnish Finder is not the same as Airbnb, right? It is definitely not going to push your listing in the same way. There’s a little bit more manual work. So what have you seen as the best strategy for actually getting bookings through Furnish Finder?

Bailey:
Yeah, honestly, the biggest thing on Furnish Finder is responsiveness. I talk to so many people who are looking for housing that no one else has answered their message or picked up the phone and called them. So anytime I get a message from Furnish Finder, I’m on it super fast. I have a VA who also helps me stay on top of the messages, but we’re staying on it within a couple minutes. Another thing that I do when I’m free is I’ll call them, call them up too personally, and say, Hey, this is Bailey. Just saw your inquiry on Furnish Finder, and just start to talk to ’em that way. That’s really the biggest thing. Sure, you can have great pictures. That obviously helps if you know which guests you’re going to attract, you can put some of that in the description, but at the end of the day, a lot of people who are coming, they’re kind of just inquiring to a bunch of different properties or maybe even just putting out there in general, unfurnished Finder, Hey, anyone who has a house here, I’m interested. So it’s kind of just a game of speed at that point. Yeah,

Tony:
I always make this joke that if I wanted to become a billionaire, I should just start a general contracting company. And as long as I answered my phone and return phone calls, I’d probably be like the biggest general contractor that existed. A hundred percent. The responsiveness I think is super important. Right. Kudos to you, man. I’m super impressed with what you’ve built out. I just want to quickly hit your last deal here, which was I think a triplex, right? So just like rapid fire, I just want to ask some questions on this one. So what city was this one in?

Bailey:
So this was Terre Haute, Indiana.

Tony:
Gotcha. And what was the unit mix? I know it was a three unit, but bedroom, bathroom for each unit.

Bailey:
Originally the realtor said it was all one bedroom, one bathrooms. When I had the inspection, I found out that one of the units actually had two bedrooms, so that was a little surprise in

Tony:
There. Gotcha. So one one’s two of those and then one unit that’s a two one? Correct. Gotcha. And what’d you buy this property for? What was the purchase price?

Bailey:
Bought it for 147,000.

Tony:
And did you have to put any capital into it for rehab?

Bailey:
No. Rehab. I actually got a credit at closing for just in case something happens, the furnace is older, so that’s kind of in the back burner, but no immediate rehab.

Tony:
That’s awesome, man. Was this A-D-S-C-R loan product or some other type of loan product?

Bailey:
Yep. This is A-D-S-C-R loan product. Yep.

Tony:
And down payment percentage on this one was?

Bailey:
So this one I was actually expecting 25% what the lender told me, and then he sends me the loan docs or whatever, and it was 20%, and I was like, okay. I asked him what the deal was, but yeah, so 20% for this

Tony:
One. And was it the same lender that you used on the other property? Yep.

Bailey:
Yep. Gotcha. All from market US

Tony:
All from market us. There we go. And then what’s your approximate cashflow on this one on a monthly basis?

Bailey:
Approximate cashflow in this one is between 3030 $500 per

Tony:
Month. Dude, absolutely crushing it. Bailey really, really enjoyed our conversation today, and I think you hopefully have inspired a lot of people to take action because we’re talking over the span of three years you went from college kid to bringing in on a good month, almost $20,000 in cashflow, which is absolutely phenomenal, brother. So appreciate you coming on. I guess any final words for the rookie audience before we jump off here?

Bailey:
No, I appreciate you having me on, and for everyone who’s looking to get started, I was listening to the BiggerPockets podcast literally in between classes in college, every second I could. My biggest piece of advice and tip and something is just like, it’s okay to start small. I used to think you had to start big, you had to start crazy, but figure out where you’re at and what resources you have and just get a base hit, get a single, I said that my first deal, yes, I happened to get a 40 plus percent cash on cash return. I can look back and say I kind of got lucky on it, and even if I didn’t get that return, I would still be super happy I did the deal because just doing the deal alone taught me so much more to allow me to do the second and third one. So sure, maybe I did get a little lucky on the first one, but I’m glad I did it literally just for the experience. If I didn’t make any money, it was still well worth it.

Tony:
And obviously brother, it’s been incredibly worth it for you because you’ve built a pretty exceptional business here, man. So I really enjoyed our conversation today, Bailey. I loved your reverse review method, kind of letting your guests tell you where to buy those next properties. I loved your kind of focus on cashflow and saying, Hey, based on where I’m at in my life, this is what’s most important to me. And I personally learned a lot with your insurance company Hacks and checking the CC line to scoop up all these other emails, brother. So a lot of great information for all of our rookies that are listening. If you’re on YouTube, please make sure to subscribe and turn on notifications there. If you’re listening on your favorite podcast episodes, please be sure to subscribe and turn on downloads. And please check the show notes because we’ll be sure to have Bailey’s contact info in there as well as mine. But that is it for today, guys. I’m Tony Jay Robinson, your host of the Real Estate Rookie Podcast, and I’ll see you guys on the next episode.

 

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