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Show Notes

[00:00:00.160] – Tony

So he just gave a lot of good advice, a lot of good tips along the way and really kind of helped us get a leg up. So who is that person going to be for you?

[00:00:09.340] – Intro

Welcome to the Michigan Short Term Rentals Podcast. The show about buying, optimizing, and managing short term rentals in the state of Michigan. Get insights and recommendations from vacation rental operators to help take your property to the next level. Are you ready to profit from your short term rental? Let’s get started.

[00:00:31.090] – Tony

Welcome to the Michigan Short Term Rentals Podcast. My name is Tony Sancato. I’m here with my co host, Jordan Painter. Today we’re going to talk about the seven critical people that you need to add to your network when getting started in short term rentals. What’s up, Jordan?

[00:00:46.590] – Jordan

What’s up, Tony?

[00:00:48.000] – Tony

Hey, big week ahead. Got some things going on. Anything? Yeah. So what are some of the things that we got going on that we’re super excited about?

[00:00:57.610] – Jordan

Yeah, so right now we are working on getting an appraisal done on our South Haven property. It’s going to be a big construction project and so excited to get that wrapped up so we can start moving down the road with construction. That’s a big one. What do you got, Tony?

[00:01:12.760] – Tony

Yes, the other big one, we got to meet up this week. Super excited about that. Our first short term rental meet up in Grand Rapids. It’s going to be at the Health Bar building. Currently I think we have 62 people saying that they’re going to go on LinkedIn and then what, another 15 or 20 Facebook that have said that they’re going to go and another maybe 30 that are interested in going. Is that right? Awesome.

[00:01:39.190] – Jordan

I’m excited to get that going. I’ve actually sparked several inquiries in conversations with people that are interested in learning more about the business. So whether they come or not, love to have those conversations and just make connections for sure. So we’ve also got a meeting today that’s going to be potentially pretty big for us. So we’re trying to scale and grow our property management business. And so we’re going to be meeting with a property management company that is at least considering selling and to see if we can put something together that makes sense for both parties and potentially blow up our business coming in the next summer.

[00:02:13.410] – Tony

Yeah, super excited about that. So hopefully more to come on that. And what do you say we jump into it?

[00:02:19.480] – Jordan

Let’s do it.

[00:02:20.580] – Tony

Seven critical people to add to your network. What’s the purpose?

[00:02:24.810] – Jordan

Number one is my personal favorite. Gotta be Tony Hills. Number one, you got to find a realtor, and not just any realtor. It really is important to find a Realtor that understands the business of shortterm rentals. If you’re going to just buy a house, that’s one thing, but if you’re going to make it a short term rental, you’ve got to have somebody who knows what to look for. And you got to have somebody who knows how to look at the data and get you accurate projections. You’ve got to have somebody that knows what township rules to look at. I know several people I’ve run into this last six months that have bought short term rentals in areas that don’t allow. So you gotta have somebody that knows what questions to ask and look at the data and make sure that it’s a good investment for you.

[00:03:11.670] – Tony

Yeah. What do you think some of the mistakes are that let’s say I’m a realtor, I don’t have a background in short term rentals. You already hit on the getting people to buy a property in an area that doesn’t allow it. But what are some other things that maybe just your standard, typical realtor isn’t going to know that they should know?

[00:03:33.750] – Jordan

Yes. Really? Where you should even start. I’m looking for one, what the township rules are, what the potential projections for revenue and Occupancy are going to be, a lot of those types of things, what to look for, for proximity to amenities, and what are people going to be utilizing this for all year, not just in the peak of the summer. So those are the big things that I would say you need to look at.

[00:03:57.210] – Tony

And I think for me, one of the big ones would be again, when we got started, we were looking at buying in Gatlinburg, Florida. The problem was that the home prices were so high and the projections were so low. So they’re not helping with that a little bit to say, hey, there’s a chance that at this price, with these projections, you might not actually cash flow. To me, that’s the biggest mistake you can make. You go into a nice $800,000 house, it has that great vacation feel to it. But at the end of the day, does it pay for itself? Does it cash flow? That would be kind of the biggest mistake that I would see. Yeah.

[00:04:39.430] – Jordan

And I think just to add to that, I think it’s really important to be working with somebody who understands what your goals are. And so some of our clients, they don’t really care if they make a lot of money. They just want to have a sweet pad that pays for itself and they can use it with their family. So that’s your goal. That’s great. If your goal is income, then it’s a whole different type of property and area you may have to look at. So definitely important to make the right fit there.

[00:05:02.230] – Tony

Yeah. And then number two, I would say on the list would be a lender. So obviously there’s a lot of different ways you can finance these, but your typical lender might not be the right one for this. So what are some things that people need to look out for when they’re trying to pick a good, qualified lender? For these type of properties and what kind of lender would it be? Commercial, residential. What are your thoughts?

[00:05:28.910] – Jordan

Yeah, great things to think about and I think a lot of it is when you’re meeting with your realtor and they’re typically a realtor is going to have a good lender referral. They need to understand your goals. So if your goal is just to have one property, then it may make sense to go with residential products. And it can be a little easier sometimes for people to wrap their heads around those products. You get a 30 year term, typically 20 to 30 year term on those versus commercial. The benefits commercial is if you’re going to try to scale your business, then each one of the properties you purchase isn’t going to be going on to your Social Security number. So it’s not going to impact your credit as much as residential loans will. The downside of those is going to be typically those are five year balloons, so the interest rate is going to be a little bit higher. The barrier for some people is going to be a little bit harder to get past. But if you’re going to be just buying one or two, definitely residential could be a good option. If you’re trying to scale, commercial is a really big one.

[00:06:24.600] – Jordan

Another thing to look at very closely is to make sure you’re working with a lender that’s going to educate you about the options. There’s not one size fits all when it comes down to this. So you want to really make sure somebody is working in your best interests and giving you the best options and advice for your particular situation. What do you got Tony?

[00:06:42.670] – Tony

What do you think about brokers? I don’t think we’ve really used a broker in the past for the commercial side, but commercial brokers could be a good option as well. Right?

[00:06:53.590] – Jordan

Commercial brokers can be a good option. They can shop around to different banks and different lenders to get you options. I think the downside can be that what we found is that the smaller a lot of times, the smaller banks, the more localized banks, there are people higher up. They can look at what you’re trying to do and determine whether or not they want to take a risk on you versus some of the larger brokerages and the larger banks. It’s just very difficult for short term rentals to fit inside the box that they created because short term rental is still a bit of a new market. And lenders, our experience with lenders has been a lot of them are pretty scared of it and really can be difficult to get financing, especially if you’re trying to scale this business. It’s just a risky asset class from their perspective.

[00:07:43.410] – Tony

Yeah, I agree. It seems like we’ve had some conversations with quite a few bankers. I mean, we’ve probably reached out to about 1015 bankers in the last two months. And not everybody wants to touch it. So yeah, try a good place to start is again, kind of reaching out to those smaller banks. They can be a little more flexible on terms and risk tolerance. A little bit more apt to work with you on that. Third, a good CPA short term rentals offer some unique opportunities in terms of tax advantages. I’m not going to sit here and tell you what those are, but reach out to find a good CPA. Find one that has a good background in real estate and if they’re already doing a lot of work in the short term rental space, they’ll be able to help navigate and guide you on the specific opportunities. One thing to bring up to them is just ask them about cost segregation and how much they need to participate in the short term rental space. Because from my understanding, the short term rental space is a little bit different than the long term rentals. So again, not going to say what you can and cannot do here, but definitely something to talk to a good CPA about.

[00:09:03.860] – Tony

Anything on that?

[00:09:05.080] – Jordan

That’s a good one. We got to be pretty careful giving legal or tax advice, but if you align yourself with somebody who really knows what they’re doing, there are massive tax benefits in owning real estate. So you just have to make sure that you are participating with somebody who can give you advice and maximize your profit through saving money.

[00:09:20.740] – Tony


[00:09:22.090] – Jordan

Number four attorney is a big one. And Tony, you mentioned a question about the financing and one of the other benefits that I didn’t mentioned can be with commercial lending. You can purchase the property directly into your business entity that you’ve created versus if you’re doing a conventional loan. Typically the lenders don’t like to do that. They want it in your personal name. So one of the next one is really getting aligned with an attorney that can put the proper paperwork together. That’s going to help you with your taxes, it’s going to help you with insurance and liability and making sure that you’re set up in a legitimate way to run a business. There’s a lot of people who kind of fly by the seat of their pants in real estate and you know, making sure that you have an attorney in the big work set up right from the beginning can save you a lot of hassle liability down the road.

[00:10:09.640] – Tony

Yeah, absolutely. Any recommendations on that? If they’re in the greater Grand Rapids area?

[00:10:16.240] – Jordan

Yeah, I do. My boy Joshua Lauka is amazing. He has helped us a ton with all of our stuff. He’s affordable, really good dude, got a good heart to serve people and his business is growing and they just get stuff done. I’m amazed every time we ask him to do something for us, the turnaround on it is just ridiculous. And he’s very affordable and so he’s done a great job for us. Definitely recommend him. If you need his contact info, reach out. We’d love to connect you.

[00:10:42.670] – Tony

Yeah, I’m pretty sure. Didn’t he have like a same day turnaround for us on a project? Yes.

[00:10:48.450] – Jordan

Tony and I, if you know us at all, we are very fast moving, squirrel chasing type of dudes. We had a closing coming up and a property we were purchasing with new partnership, and I went on vacation. I got home, we were closing the next week and realized that we had dropped the ball on a couple of things and Josh was saving our bacon on that one. So shout out to him again. Thanks, buddy.

[00:11:08.080] – Tony

Got it done for us.

[00:11:09.060] – Jordan

And yeah, it was a close call.

[00:11:12.490] – Tony

Yeah, absolutely. Number five is insurance. So make sure you have a good insurance agent company in your corner. Don’t go into this, don’t buy a place and just have your typical homeowners insurance on this. I’m not going to tell you how to insure it appropriately. Again, that’s going to be what your insurance agent is going to be there for, but definitely have found a lot of value in talking with the proper one. So I think we’re well covered. We try to go over and above on coverage. Again, the thing that’s going to make you lose sleep at night is going to be when you’re open to risk, but I think we can sleep well at night knowing that we’re appropriately covered. Maybe a little over covered at certain points. So any thoughts on insurance?

[00:12:03.040] – Jordan

Yeah, again, I think you nailed it. Just finding a good one that knows what you need to have. There are very few insurance companies who actually understand the short term rental game, and I think there’s a lot of people with a lot of liability that they don’t even realize they have because they’re not set up and insured properly. And that goes from ensuring the properties, ensuring the business if you’re running it through your entity, ensuring the contractors and the house cleaners and all those different things. There’s just so many levels of insurance, it will make your head spin. So you really have got to partner with somebody who can give you good advice and tell you what you need because it’s very complicated to make sure that you’re insured correctly in this business.

[00:12:43.590] – Tony

Yeah, absolutely. And I’ll shout out T. J. Simmons over at Shield Insurance. We actually just recently switched over to them. They’ve just been a huge help. They actually saved us some money and we have better coverage. So if you are in need of a good insurance agent, feel free to reach out to them. They are a broker, so they can kind of shop it around. After I seen what they saved us on our business insurance, I went through and moved my personal insurance to them as well. So, great opportunity to not only save money, but to increase your coverage as well. So again, shout out to TJ Simmons over at Shield Insurance. Really appreciate the support over there.

[00:13:27.930] – Jordan

Awesome. Now we’re on to our last one, which is if you’re not going to selfmanage your property, you need to find a good property management company. And so if you have a good property manager, they’re going to have all of the systems and contractors set up for you to operate the business. And essentially all you do is wait for that mailbox money and that check to come every month. So really interviewing the property management companies, making sure you find somebody who is specializing in the area that you’re in and has experience in good systems and processes to make sure that you’re maximizing the potential. As we’ve been moving into new markets, we found some interesting opportunities, we think, that have been created because a lot of the managers haven’t really raised the prices up to what people are willing to pay today. And so you got to make sure your manager is taking a look at the market and making sure that you’re dynamically pricing these properties to get maximum potential. Tony, what kind of insight you have.

[00:14:28.350] – Tony

There, finding a property manager? Again, we’ve acquired some clients that already had property managers and they just weren’t satisfied with the effort and the guidance that they’re giving them. So we’re able to go in, make some adjustments, and hopefully improve their revenue and profitability over the years. So, yeah, I just want to make sure that, again, as companies grow and they have 80 to 100, are they still giving you the attention that you deserve? That’s something that we’re going to be very adamant about, making sure that we’re constantly tweaking and making sure that we’re filling that schedule as much as possible.

[00:15:10.060] – Jordan

I think one of the things to look for, I think that was a red flag for us, for a couple of the people that we’ve interviewed that already have managers is that very, very early in the season, they’re already booked up 90% to 100% for the summer. And our perspective is if your product is selling that quickly, then it’s probably underpriced. And so I think there’s a lot of room to make sure that if you’re analyzing how your property is doing, one of the good ways to look at it is how far out are you booking up? And if you booked solid, there’s a good chance that you probably left money on the table for the next summer. We’re kind of in that fall season where this business gets pretty brutal as far as that income goes. So if you haven’t made your money in the summer, then you have to wait a whole another year to get another crack at really maximizing profits.

[00:15:58.150] – Tony

Absolutely. And I know you said the last one was the last one, but I’m going to throw one more in there for good measure, and I’m going to just say get a mentor, find somebody. If you’re just getting into the short term rental space, find somebody that has a couple of properties that are already ahead of you. I can just speak from experience. When we started, I really connected with somebody. I stayed at their place for close to a month and they had two properties, so I just continued to pick their brain and gave us a lot of good advice and a lot of the stuff that he said ended up being true. One of the things he said is like, hey, you’re going to find that we were super nervous about hosting ten guys all at once. Oh, man, are they going to trash our place? And he just said, hey, you’re going to find that a group of older adults, it’s going to be a lot less messed and a lot easier to clean than, say, two families with six kids. I would have never thought that. And sure enough, he was right.

[00:16:57.430] – Tony

Kids like to take out all the puzzle pieces and all the game pieces. And I can speak from his experience. It’s hard to get everybody in the car, clean everything up before you leave. So he just gave a lot of good advice, a lot of good tips along the way, and really kind of helped us get a leg up. So who is that person going to be for you on them and see if you can kind of shortcut the track to success, I guess. Anything on Mentor Jordan?

[00:17:26.050] – Jordan

Yes, I think it’s big. Tony has connected with a couple of different people in our first year and a half in the business, and we’ve gone to them for contracts and what do you do when this happens or that happens, and it’s really been good for us. One of the other people that he connected with is a couple of steps ahead of us in the business as far as the amount of properties they’re managing. So it’s always nice to be able to kind of see what problems that you don’t even know that you’re going to have and start to work solutions for them before the fire has started. So definitely a big deal to have that membership and I think just the last thing to close this out. Being in real estate, I am a big, big proponent of making sure that you’ve got referral partners. And so the other thing to look at when you’re picking these type of contractors is making sure that you’re setting up people who potentially could be good referral partners for you to help you grow your business, depending on what your goals are. So you make sure from the outset that you’re setting that expectation with your partners that, hey, we want to try to help each other grow our businesses and just make sure you lay that out there and it’s people that you are comfortable referring business to and also getting referrals from.

[00:18:37.840] – Tony

Absolutely. If you get a chance we’d really appreciate. Head over to the Apple podcast and leave us a review. Or over on Spotify. When you leave a review, it makes it easier for people to discover us and listen to the podcast. So really appreciate that. If you’ve enjoyed it, go over there and leave a review for us. And if you’re not on the Michigan Shortterm email list yet, go over there, jump on the email list. You’re going to get four very valuable emails that’s going to help you in your journey of finding a short term rental. We have 650 zip codes that we’ve already ran numbers on, projections, and you can filter it from highest to lowest, so you can see what areas are projected to give you the most revenue. And we also provide some different calculators that we’ve actually built out for ourselves. One being a property grading tool. So if you want to analyze properties the way that we analyze properties, use this tool. Put the information in there, get a letter grade. Hey is a letter grade B. All of our properties are a letter grade B. So that should give you some confidence.

[00:19:49.530] – Tony

And hey, this could be a good property. If it’s A, C, or D, you might really want to second guess whether that’s a property that will do well. So again, go over to Michigan Short Term and right there on the home page you’ll see a place where you can join the email list. Get on that and start getting those emails. And until next time, talk to you later.