Kirby Atwell (02:25):

My first duty station was down in El Paso, and that’s when I picked up the book, Rich Dad, Poor Dad, like so many others, that was the entry drug to get into real estate investing. And I read that and I decided… I knew I wanted to be an entrepreneur, I wanted to own something that my pay was determined based on how hard I worked and how smart I worked. But I realized at that point, it was going to be real estate. So I bought a couple of rentals in the El Paso market when I was down there, and I knew pretty much nothing.

Kirby Atwell (02:56):

I read Rich Dad, Poor Dad, went across the street from where I owned a house with a couple buddies, and I bought my first house by myself that was going to be a rental property. And this was in 2006 when prices were at their peak. But luckily, I was in El Paso, Texas where the market pretty much never changes. So I bought a couple while I was there. And then I was stationed Hawaii, bought another one there. And in 2011, I got out the army and I decided I was going to do it full time. I was going to jump into real estate.

Kirby Atwell (03:25):

Now I didn’t have the benefit of having a W2 and the option for conventional type of financing because I was unemployed, so I decided to start flipping because it seemed like that was how people were making a whole bunch of much of money in real estate when they couldn’t get these long term loans. So that’s where I started.

Robert Leonard (03:45):

First and foremost, thank you for your service. Much appreciated. Was the flipping loans much easier to get when you’re not a W2 employee? And if so, why is that?

Kirby Atwell (03:54):

Typically, for flipping, you’re going to see either hard money, it’s called, where it’s basically high-interest, short-term money. The underwriting is based on the asset itself, so the lender is going to look at the flip and say, “Okay, what you’re buying it for plus what you’re putting into it is going to be less than what it’s worth, so it makes sense for me to lend on this,” and then they’ll charge a higher interest rate because it’s a higher risk profile than a long term loan. Or you can use private money, which is basically friends and family to start with for most people.

Kirby Atwell (04:27):

And it’s people who say, “You know what, I’m getting 8% long term in the stock market, I’ll give you my money for 10% and you can use it to put into properties.” And 10% money in a market right now where interest rates are 3% or less on 30-year loans seems like a lot, but if you’re just using it for four to six months to do a flip, it’s not a crazy expensive type of money

Robert Leonard (04:52):

At the peak of your real estate business, the flipping business, how many houses were you flipping a year?

Kirby Atwell (04:57):

Like I said, I started 2011, and I partnered with two friends right after I got out of the army, and we started with one property. And then within about three to four years, 2015, 2016 was our peak of flipping, we were doing 22 different deals at the same time in different stages. We had some under contract to buy, some under rehab, and some on the back end of the market to sell. And we had about $12 million of capital invested into these properties.

Robert Leonard (05:26):

Before we talk about how you were able to do so many deals at once, how did you do during the great recession? Looks like your real estate career span that you started in 2006. And now you were just talking about 2011. So what happened in between there and how’d you weather that great recession?

Kirby Atwell (05:40):

Yeah, it’s a good question. I was just getting started when all that happened. I bought my first two properties right as the market was peaking, but they were extremely affordable, $100,000 rentals that were in a very stable market. I look back and I was just so fortunate that I wasn’t stationed in Hawaii first, I was stationed El Paso first, because the way El Paso was impacted compared to Hawaii is drastically different. I bought those properties for $100,000, I sold them in 2017 or ’18. So I held onto them for about 15 years. And I think I sold them for 105, so they just were very steady.

Kirby Atwell (06:19):

I barely put anything into them, they were turnkey, just a few hundred dollars of cash flow, great rentals to learn on. Then I was stationed in Hawaii where I bought I condo in 2009 after the crash. It was an ocean view, actual ocean view condo, two bedroom room that I got for 240. And in Hawaii at the time… And it was a foreclosure, the banks were just like giving away properties because they were so freaked out at the time. And now, that same property is selling probably for 600,000. So just timing is everything. But luckily, I wasn’t deep into it like a lot of people who had these horror stories of losing everything during the recession.

Robert Leonard (07:01):

How long did you own that Hawaii rental for, did you let it get to 600,000 or did you sell it much sooner?

Kirby Atwell (07:07):

I sold it, I think it was 425. That’s what I sold it for. So this was, again, around the same time I sold El Paso properties. I got to a point where I was like, “I want to systematize things and get rid of some of these properties that I didn’t have economies to scale around.” So I sold those in, I think it was 2017 or ’18.

Robert Leonard (07:27):

How were the renters during the great recession? Did you have any problems with your renters in El Paso paying any rent? Or even in Hawaii after, because still for a few years, 2009, 2010, ’11, ’12, people were still struggling. So was there any problems with people paying rent?

Kirby Atwell (07:42):

I never experienced much issue with it. At the very beginning in El Paso, I picked the cheapest property manager I could. Again, I knew nothing about rental property, about real estate really at all. So I just looked up 10, 15 property managers in the El Paso area, called them all and said, “What do you charge?” And then I picked based on the cheapest one, which is not the method I recommend to people these days. It was an elderly woman who had been in real estate her whole life and just was not interested in doing pretty much anything. So the property, my first tenant was not great, and then it sat there.

Kirby Atwell (08:23):

But then I realized, “Okay, I need to pick somebody who, even if I’m paying a few percentage more, is really proactive.” And so I picked a really good property manager there. And then I was renting a place in Hawaii when I bought the rental property, and my property manager in Hawaii was really on top of it. And so I just hired him because I was like, “I’ve already vetted you.” And he did a great job until the time I sold it. So it certainly makes a big difference who you select.

Robert Leonard (08:50):

Why can’t we just pick the cheapest property manager? What are you looking for that makes for a good property manager?

Kirby Atwell (08:56):

Yeah. The proactivity piece is the biggest thing. I recently sold an apartment building that I bought in Indianapolis several years back, we rehabbed it, we stabilized it. And it’s in a great part of Indianapolis. By all accounts, it should have been a great deal, but I still had challenges with the property management. It’s an 11-unit apartment building, which is kind of a size that’s not super appealing to property managers. Single family property managers don’t want to do it, it’s a lot more work for them. And then 100-unit property manager type property managers don’t want to mess the… You don’t get the economies to scale.

Kirby Atwell (09:36):

So I went through four different property managers, and the biggest thing I can tell you for all the problems that I kept having is just, it boiled down to proactivity. It was like, “If I’m doing it myself and I’m getting the rewards of all the upside and appreciation and all that, then I’m going to be there all the time. I’m going to stop, check on my tenants, try to ask about issues in advance and head those things off, have all this maintenance in place that is proactive maintenance.” What my property managers were doing is like, “What’s the least I can get away with?”

Kirby Atwell (10:13):

And then when something would happen, it was like, “Well, on Monday we’ll have our maintenance guy take a look at that.” And by Monday, it’s compounded in the unit next door, and then you’ve got a angry tenant and now you’ve lost all this goodwill with all your tenants, and they’re spreading rumors throughout the whole apartment building. And it just is this downward spiral. So proactivity and being on top of stuff before it starts is by far the thing that’s going to save you the most money.

Robert Leonard (10:39):

I know a lot of new investors wait on the sidelines before they get started, because they’re waiting for a perfect deal or an absolute home run before they get started. It sounds like your first two deals in El Paso were not home runs. They sound like good deals, sounds like you collected some cash flow every month and that’s great, but you didn’t have much appreciation, so it wasn’t really grand slam. Do you think you would’ve gotten started if you hadn’t… say you look forward into the future, do you think you would’ve eventually got started into real estate? Or do you think that those properties were really the pivotal point for you and that people need to just get started with a deal? You don’t want to buy a bad deal, but even if it’s not necessarily a home run, but just get started and get your feet wet.

Kirby Atwell (11:16):

Yeah. It’s a great question. Yes, I think you need to get started. I think if I had bought right around that timeframe in a market like Hawaii or California or Florida that got crushed, I might not have continued in the real estate because I would’ve had such a bad experience with it. So you definitely still want to, I think be cautiously optimistic, but also know, and this is something I tell people all the time when they’re asking me, “Can you take a look at this deal and let me know what you think.” I always tell people there is always going to be way, way, way better deals than the one you’re buying, and there’s also going to be way, way, way worse deals.

Kirby Atwell (11:52):

So how do you make a decision whether it makes sense for you to buy this? And it always goes back to your individual goals that you’ve laid out in advance, and what’s the outcome you want as a result. Because I hear people tell me all the time, “I just want a good deal.” And I’m like, “Well, there’s a lot of people who “sell you on a good deal,” and it’s all in the definition of what you say good is.” So if your goal is to work your nine-to-five because you love it for the next 30 years and then retire on rental properties and your nine-to-five is all consuming, you don’t have the time to put into the properties, then you’re going to buy a very, very different…

Kirby Atwell (12:30):

I would recommend you buy a very, very different type of know that maybe is more turnkey, might not have the forced depreciation that you can get through like a BRRRR type property, but you’ll know you’ll get that steady 1% type return that a lot of people target. And when it comes time to retire, you’ll have a very nice nest egg as opposed to somebody who might be looking to foot deals right now to their grocery bill this month or somebody who might be looking to leave their job in three years, the type of properties they’re going to buy are going to be very different than the people who are buying rental properties for the long term.

Kirby Atwell (13:04):

So it really always goes back to your individual, what are your unique strengths? Your differentiators that is going to give you that leg up. Maybe you have a friend who’s a really good contractor that you can work with, and so you’ve got that team in place. Well, now BRRRRs probably make a lot more sense for you as opposed to buying something turnkey. So go back to look at what you want as a result and what your unique strengths are, and that will lead you to the type of deal that makes sense for you.

Robert Leonard (13:35):

Going back to when you were flipping mainly and you were doing 22 deals at once, what processes or systems did you use? What advantages did you have that were allowing you to do 22 deals at one time? That sounds like a lot to manage.

Kirby Atwell (13:47):

Yeah, it was. And if I could tell you systems that would allow you to scale in flipping, I would probably still be in flipping. But I ask people all the time, “Can you name me a national flipping company that has made their wealth from flipping, not from selling people on how to flip, not from eventually getting into rentals, but flipping, pure flipping? Not from wholesaling, there’s a ton of national wholesalers out there that do high volume wholesaling, but just flipping.” And I still have not heard anyone be able to name that company.

Kirby Atwell (14:21):

So that would indicate to me that it’s been tried by lots and lots of people to scale a pure flipping operation, but I haven’t seen it done well by anyone. Zillow, yeah, their whole flipping operation just went defunct. So it’s a challenge. And I think one of the biggest challenges is there’s so many unique issues that come up and so much people management involved in flipping. When we started, we were doing affordable flips in a middle market areas on the West suburbs of Chicago, which, a huge buyer pool, a very affordable area for most families, but we’d get done with the property and all the profit was things we spent on our operational expenses already for the last six months while we were flipping.

Kirby Atwell (15:06):

So we realized, “Okay, well, I guess we need to scale then. We need to do more deals, we need to do them in higher end areas.” And so we expanded and started growing. And that’s when the problems started to compile. When you’re in it, you don’t see from above and you can’t really see how the numbers are all working because we had $12 million in 22 different deals, and they’re all in different stages, coming from different areas, different terms, all these moving pieces. And so we just kept our mantra, like most entrepreneurs and most people who are getting into real estate in the beginning, it’s like, just grow.

Kirby Atwell (15:42):

Because the answer is, if I just grow, I do bigger deals. That’s what’s going to lead to success. And after five years, in 2016, I sat down and really did a deep analysis. And I was like, “You know what? I’m in the exact same spot financially as I was in 2011, because we’re making a lot more.” We had 13 staff members, we had five different project managers, a team at our office answering the phones, and we were sending out tens of thousands of dollars in marketing every month. And so we were growing and we were making we’re a seven figure a year company in revenue.

Kirby Atwell (16:15):

But when it came down to, at the end of the month, after everyone else got paid, there was never a whole bunch left over for the owners. And it was just like we started to grow this hamster wheel that we were on and we just kept putting more and more into our company. And so at that point, that’s when I realized, “You know what, I’ve got to transition from this job that I created for myself that actually is a lot less fun than when I started, because now there’s a lot more people involved, a lot more problems. I’ve got to transition from that to why I got into real estate in the first place, and that’s owning assets which will lead to wealth and financial freedom.”

Robert Leonard (16:51):

Yeah. You mentioned exactly what I was going to say, and that was, it sounds like you built yourself a job. A lot of times flipping is considered, you can make great money. You can make great profit in short spurts, but it’s just no different really than buying a job.

Kirby Atwell (17:04):

Exactly. Yeah. It’s tough to build wealth, true wealth from flipping.

Robert Leonard (17:09):

A lot of people can’t even find a deal. They’re like, “How is this guy doing 22 deals at once and I can’t even find one single deal to buy?” You mentioned you’re spending tens of thousands of dollars on marketing a month, or you were at that time. So I’m guessing that’s probably how, but breakdown what you were spending that tens of thousands of dollars a month on and what strategies were using to find deals.

Kirby Atwell (17:29):

We tried everything back then. What I tell people a lot and it’s difficult to wrap your head around if you haven’t been down that road, there’s a huge difference between owning a flipping company that you buy your groceries from the money that you’re making in your flipping company, to doing either working a full-time job in doing a flip on the side where it’s extra income or doing rentals and you’ll do the occasional flip here and there that’s opportune. Because when you create a flipping company, that’s what’s creating the revenue in the company. And so you do your business plan and you’re like, “Okay, I need to do four flips a month in order to pay for my costs, in order to pay for the marketing and pay for my staff and pay for… ”

Kirby Atwell (18:15):

It’s interesting because you start to take on more deals than you necessarily would or the types of deals that you would probably say no to, if it wasn’t required to get four to pay your bills. Because we needed that many deals, we were doing a lot of yellow letters, direct marketing. We were doing bandit signs. We did a ton of bandit signs. Bandit signs work the best, I think, in the beginning when you’re at a small scale, but you can reach a tipping point where you just totally oversaturate a market. And we did some Google Ads, some online marketing. So it was a little bit of everything, anything we could do to throw spaghetti at the wall to see what stuck.

Kirby Atwell (18:55):

Another problem that we ran into is that we scaled so quickly, we didn’t have the systems in place to really follow up with all these leads. So we’re spending tens of thousands of dollars to send out thousands of yellow letters or postcards to people, and then they’d call us and we didn’t have a good follow up system. So we might answer the call and we don’t think it works out or they say it’s not going to work out, but we don’t… Usually, you convert these people on like the fifth or sixth touch, and we just didn’t have the follow up.

Kirby Atwell (19:23):

And so I know looking back, there were tons of great deals that were in these leads that we had that just never turned into a deal because we just didn’t follow up with them. So it was a little bit of everything. But now, because I’m not doing the volume that I was before, I feel like I’m getting better deals and I don’t spend a dime on marketing. It’s all through I go directly to listing agents and talk to them. I’ve built relationships with listing agents in the market that I’m in. Most of the time, the deals are being brought to me.

Robert Leonard (19:52):

When you decided to make the transition out of flipping, how did you end up in short-term rentals? That’s mainly your focus today. So how’d you get into short term rentals from flipping?

Kirby Atwell (20:03):

In 2016, I decided, “This isn’t going to work.” My partners wanted to continue with flipping and we talked and came to an agreement on what that looked like. And so I basically started a new company from scratch that was a rental property company. And initially, it was long-term rentals, so I built up a portfolio of 16 single family homes and the 11-unit apartment building that I was talking about. And it was great. Initially, I was using the BRRRR model, so I was buying them cheap, and then I would rehab in a whole bunch of equity and high cash flowing properties. But the problem was, it was very inconsistent. I was doing a voucher model where my tenants were veterans who got this voucher from the VA that paid for their rent.

Kirby Atwell (20:51):

And so it was a much more management intensive process and it was a lot more challenging than a typical rental model. So I struggled there to get consistent cash flow. It was high cash flow, but then I’d have a tenant move out, and it was a house that I just rehabbed a year earlier and now I got to spend $40,000 again to re-rehab it because it was just destroyed. Because all of these homeless vets that I was housing were going through some issues in their life that caused homelessness. And a lot of times it would show up in the properties.

Kirby Atwell (21:25):

So I decided that long term wasn’t going to work. I had built up some good equity and made some cashflow, but I wanted something a lot more dependable and I also wanted something that I could systematize and have more reliable cashflow. So that’s how I transitioned eventually into short-term rentals.

Robert Leonard (21:41):

When I look into good areas for short-term rentals, there are a select few places that almost always show up, Joshua Tree, The Smokies, Yellowstone, central Florida, and even around Orlando. I’m sure there are other good markets, but those are the biggest ones that seem to show up over and over again for me. So how are you finding good markets to invest in for short term rentals? And how do you think about competition when you’re choosing your markets?

Kirby Atwell (22:07):

Yeah, I think you’re right. You go in any of the short term rental Facebook groups, and it’s like those three markets are the only three places that anyone can ever invest for some reason. And what I’ve seen is that this works in literally thousands of markets around the world. And I think those stand out because they’re like your traditional vacation rental areas. And over the last several years, yes, we’ve seen people buy into those markets and it was a good deal five years ago. Now, they’ve just absolutely crushed it because they’ve made so much equity because the prices have gone up so much.

Kirby Atwell (22:42):

And Airbnb, the demand for it has just gone through the roof because if you think about after COVID, people didn’t want to stay in hotels, they didn’t want to have joined walls with other people. And so there’s a lot of people, like my parents, who had never used Airbnb before that all of a sudden looked in Airbnb started using it and realized, “I can get a whole house for the cost of a hotel room. Why would I ever go back to a hotel?” And so that demand just keeps picking up. And so it’s really, really benefited people who are in the short term rental space. But it’s such an accepted practice now. It’s not just vacation rental areas anymore.

Kirby Atwell (23:19):

And so what I always recommend to people when they’re trying to figure out an area to invest is, you’ve got to rank order your reasons for investing. Obviously, if you like to vacation with your family to the Smokey Mountains or to Joshua Tree every year and you’re set on that location, then buy there, and it’s probably going to be a decent deal. But if you’re more concerned about cash flow, then maybe you don’t want to spend $700,000 on a house because prices are up so high, there’s other areas where the price point to rent ratio, the percentage increase in rents typically outpaces the percentage of purchase price.

Kirby Atwell (23:58):

A lot of times, you can buy in a very affordable area, but the rent rate is still high enough to get you really great cash flow. And so that’s what I’ve done. I’m in the Northwest Indiana area right about an hour south of Chicago on Lake Michigan. The properties here are extremely affordable compared to people who I talk to in California or on any of the coasts. But the rent rates, the nightly rates, it’s still really, really high because of that supply and demand type, the shortage of housing in the area for the amount of people that want to travel.

Kirby Atwell (24:36):

So I would say, figure out what it is that appeals to you about it. If you want to be hands on, you can probably find within a two-hour radius an area you that works really well as a short-term rental area, especially if you’re anywhere close to a city. And now we’re outside of the city right now is some of the best places you can invest because people want to work remote and still have access to the city to drive in, but they don’t want to live in the city or stay directly in the city. So figuring out what appeals to you and not saying, “Well, this is where everyone else is buying right now,” I think is a really smart strategy.

Robert Leonard (25:12):

I haven’t done it yet, but north of where I live, maybe about an hour, within an hour, an hour and a half or so, there’s an area that people go for skiing, and riding snowmobiles is very, very common in the winter. And then in the summer, there’s a couple big state parks up there and people go and they ride four-wheelers and do all kinds of like swimming in lakes and stuff up there in the summer. And the prices of those properties are so cheap because nobody lives there year round. So if you’re going to buy it to live there, it’s super, super cheap because nobody does that. So it seems like a really good Airbnb opportunity. It’s something that I’ve been considering.

Robert Leonard (25:45):

It’s scary though, buying a property because this town, probably 50, 60, 70 years ago was just all factories or had one industry and that industry is completely gone and obliterated now, so nobody lives there. So it’s a little bit scary for me who’s always like a traditional rental person to buy in an area like that. I do know so many people do vacation there.

Kirby Atwell (26:05):

Yeah. It sounds like a great opportunity. I’m in Michigan City, which was the biggest train producer in the whole US, train car. They produced the most train cars of any town in the whole US back in mid 1800s through the early 1900s. So its a huge industrial area. Obviously, that’s all gone away. And so there’s parts of the city that are depressed, like a lot of previous industrial areas, but then there’s also the lake. You’ve got Lake Michigan there and you’ve got outlet malls and you’ve got wineries and stuff on the outskirts. And so there’s still draws there. And so it’s, like I said, very affordable.

Kirby Atwell (26:44):

And if Airbnb went away, which I’m, I’m getting three times as much or more in a lot of cases on a monthly basis than I would as a long-term rental, but if Airbnb goes away, it still works as a long term rental because the houses are so affordable. So right now, I feel like I’m just getting all this bonus cash flow and I’m not staying awake at night going, “Well, what if things change with short term rentals?” There’s always the backup of you can turn it into a traditional rental.

Robert Leonard (27:14):

That’s one of the downsides to that area that I was just telling you is I always told myself that if I bought a short-term rental that was just dedicated to short-term rentals, because I do a little bit of short-term rentals right now, but if I bought one that was dedicated, sold as short-term rentals that I had to have an exit strategy where I could turn it into a long-term rental. And that would not be the case of there, it’s either Airbnb or bust with one of those properties. So I’m not sure I’m going to dive in there, but the properties you get like a three, four, five-bedroom house for…

Robert Leonard (27:40):

There was a four unit I was looking at once and it was like 45, $5,000 and it was moving ready, and it was just so cheap. Compared to where I live in the Boston area, that would be four, five, $600,000. So to see it for 50,000 up there seems like an opportunity.

Kirby Atwell (27:55):

It sounds like too, that’s an area similar to where I’m at, like a Northern Wisconsin or a Northern Michigan from a Midwest perspective, where those areas actually have very little low season because a lot of people go up there to snowmobile and do winter sports, and then in the summer, lakes and outdoor activities. So it’s actually you’re buying in these remote areas that are affordable, but you don’t have the off season issues that you do a lot of times in very seasonal areas like we’re in in the north.

Robert Leonard (28:28):

If you’re buying these properties that we’re talking about, you’re looking for something that doesn’t necessarily, maybe it’s not the most touristy destination, so property values aren’t super high, but the nightly rate is pretty strong. What tools and resources are you using to find those properties? If that market’s not near you and you just don’t know about it, what are you using to find those markets?

Kirby Atwell (28:47):

It’s a combination of things. I try to picture it as like a funnel of information. So you can start with airdna.co, that’s the leader in pulling in data for short-term rentals. So if you go to AirDNA, you don’t even have to pay for a page subscription, they give you a bunch of free data on towns. If you pay for a subscription, then you can really zoom in on an individual property and get historical performance on a property. But I don’t think you need to do that. I think I’ve only used the free data.

Kirby Atwell (29:18):

And so I’ll pull up a town, it’ll show me the average occupancy rate of all the short-term rentals in that town, the average nightly rate, how many vacation rentals there are, what platforms they’re on, whether it’s Airbnb or Vrbo or others. And so that gives me a good 20,000 foot view of that area and know, obviously if I’m looking at a new area and it says there’s a 30% occupancy rate across the whole area, it’s a big red flag. Maybe I just want to avoid the area. But if it shows 70% occupancy rate, that’s pretty good, because the average across all Airbnbs worldwide is right around 50%.

Kirby Atwell (29:56):

So if you’re up in 70, 80%, that’s great. But I want to know specifically for the property I’m buying because you might have an area where part of them are a million dollar houses plus on the beach, and part of them are downtown and they perform very differently. So then I’ll go to Airbnb itself and I’ll actually look at the comps, starting geographically at my subject property that I’m looking at buying and working my way out. And I’m going to look for very, very similar properties. So same bedroom count, sleeps the same number of people, similar type style of properties, similar amenities. Does mine have a pool?

Kirby Atwell (30:32):

The ones I look at, I want to have a pool as well. And then I look at, does it have a 4.9 rating or higher guest rating or higher because that typically represents a good host. Does it have 100 reviews or more because it’s much harder to maintain a 4.9 over 100 reviews than it is if somebody’s just coming out of the gates and just trying this out. So I’m looking at all those factors and I’m going to figure out based on their calendars, are they booked up into the future? What are their nightly rates now? What is it six months from now in the opposite season? What are all their reviews say?

Kirby Atwell (31:05):

I’m going to read through the guest reviews, because they’re going to tell me why people are traveling there, what they loved about the house all the different nuanced stuff that I might not be thinking about. And once you’ve done that on multiple properties, working your way out from where yours is located, you can get a really, really good idea of occupancy rate, which is what you need, your nightly rate, which is your average nightly rate, which is another number you need. And then who your ideal guest is, because the better you understand your ideal guest, the more money you’re going to make, the more impactful your vacation rental’s going to be, and the better you’re going to do in terms of revenue. So that’s my process us for analyzing an area.

Robert Leonard (31:45):

Do you know how AirDNA gets their data?

Kirby Atwell (31:48):

I believe they scrape it just from all the different vacation rental sites. I don’t know that they’ve actually published exactly how, but I know a lot of it comes directly from Airbnb and Vrbo and the other sites.

Robert Leonard (32:02):

Yeah. I was thinking that they scraped it as well, but when you read into Airbnb’s terms of service that is not allowed. So I don’t know how AirDNA has… And the reason I know that is because there’s nothing like AirDNA for RVs, and I just talked the other day about how I’m getting into RV rentals. I wanted to create AirDNA for RVs, RVDNA or something like that. But I saw in their terms and conditions that you can’t scrape their data, and Airbnb has the same thing. So I’m trying to find out how AirDNA is able to get around it.

Kirby Atwell (32:31):

Yeah. That’s interesting. Because there’s Mashvisor now, there’s a bunch of data companies, so they’re figuring out a way around it somehow.

Robert Leonard (32:40):

How do you think about laws and regulations in that area once you’ve found it? How do you find the information about laws and regulations? That’s been the hardest part for me is, since I’ve started to dive into this a little bit, I’ve heard some areas require certain length stays, some require you to remit quarterly or monthly payments to them for taxes. There’s all kinds of different rules and laws and regulations depending on the area. And I’m having a hard time finding that type of information, so how are you finding it in the areas that you’re investing in?

Kirby Atwell (33:12):

A couple things here. You’ll hear people a lot of times say, “Oh, Airbnbs, aren’t allowed in that area.” And when pressed on that, what you’ll find out is just like you said, there’s so many different versions of what that means. It’s the Wild West right now, short-term rentals. There’s no set standard of how to handle vacation rentals. And so they’ve left it up to mostly the local municipalities to make the rules. And so some areas they say you can’t have anyone stay more than or less than 30 nights, some say you can only do vacation rentals for three months out of the year, some say, you just have to pay a fee and register, every different version of the law.

Kirby Atwell (33:53):

So when somebody says, “Oh, they’re not allowed there,” I always want to see what is the regulation say. And then on top of that, making a regulation and enforcing a regulation is two totally different things and it’s a very difficult thing. It’s easy for a city council who knows nothing about vacation rentals to just make a law because they have angry constituents saying, “I had a party house next to me.” So they make a law that they have no clue how to even enforce or how they’re even going to see who has vacation rentals, because the address doesn’t show up on Airbnb, so it’s a tough thing to wrap your head around.

Kirby Atwell (34:31):

But at the same time, I think it scares people away from doing Airbnb, and I always say, in a lot of cases, it’s a huge blessing. Where I live, the town next store, just cracked down and they said, “We’re not going to issue any more permits for vacation rentals. So the existing vacation rental owners can still do it, they’re grandfathered in, but we’re not going to issue anymore.” And so it’s going to decrease the amount of vacation rentals in that area, but the demand has not changed. So if I have a vacation rental right next door, now mine just became more valuable because the guests who were going to stay at the new ones that were going to continue to pop up, they’re not popping up anymore.

Kirby Atwell (35:08):

And so there’s less to choose from. And so the way people search is they’ll search for a whole area and mine will pop up and they’ll book mine instead. So there’s strategies around that where you can find places where it’s been banned in one city, but right next door on the border, you can make a killing because you’re allowed to do it there, and the demand that go to that city is huge, but there’s just not enough vacation rentals for people. So in terms of your question though, of how to figure out the information, it’s again, to me like a big funnel, just like it is to figure out where to buy or how to research where to buy.

Kirby Atwell (35:43):

I start with the biggest municipalities because obviously states can have rules around it. There’s actually some states like Indiana, Tennessee, I believe Michigan just did this, where they’ve said that their cities aren’t allowed to eliminate Airbnbs. So they’re very pro Airbnb. Now, there’s some towns and municipalities that are grandfathered in that have already made rules, but there’s some states who are pro Airbnb. And so I want to figure out the vacation rental rules for the state, and then I go to the county and I’ll look at the city council page. Every county is going to have a city council that makes the rules and regulations. And I can look back at the minutes.

Kirby Atwell (36:22):

And a lot of times it’s very searchable, so they’ll have a search bar at the top and you can just put it in short-term rentals or vacation rentals. And you can see all the different minutes where they’ve discussed it. So you can see what the sentiment is on short-term rentals. Maybe they’ve already made a law. And so if they have, great, then it makes your job a lot easier because you know what to expect. If they haven’t, I want to know, are they fighting this are they? Are they more pro Airbnb, they want people to come and visit and they’re big on vacation rentals? So I’ll go to the state first, then the county, then the city. And then obviously if you have association board or a neighborhood board, they can put further regulations on it.

Kirby Atwell (37:00):

So I try to avoid condos and areas where there’s associations because the vast majority of people living there aren’t going to have vacation rentals, so you’re going to be the minority and it’s like popular vote, how they’re going to approach it. So I don’t like to play in those areas, but that’s the way I approach it, it’s this big funnel and work your way down. And then once you know the actual rules, then talk to property managers, call property manager and say, “Hey, I want to buy a vacation rental in that area.” They’ll tell you everything there is to know because they want to manage it for you. So ask them because they deal with it every single day as to how, actually what the rule is and how it’s enforced and all the nuances behind it.

Robert Leonard (37:40):

Yeah. This whole dynamic of regulations is one of my two biggest hiccups or hurdles holding me back from getting started, really diving into short-term rentals because I’ve looked in Florida, and a couple of the places that I’ve looked at Florida, they have HOAs, like you mentioned. And I don’t really want to deal with that because like you said, HOAs could change their mind basically at the snap of their fingers. And then just on new municipality level, I have some family in Hilton Hills, South Carolina, it’s a big Airbnb area, they just outlawed Airbnbs. I have some friends in Virginia Beach, they just had some issues with Airbnbs there.

Robert Leonard (38:16):

And then I believe it was Yellowstone, there was a big thing recently where a lot of people bought very expensive properties in Yellowstone to be Airbnbs and then Yellowstone either outlawed it or only grandfathered in who was already there. There was something going on there where those people basically couldn’t do short-term rentals anymore and they were left holding the bag. So this idea of laws and regulations is one of the things that’s concerning to me. And the second is a recession, and I’m just not sure how Airbnbs and short-term rentals are going to do in that type of environment.

Robert Leonard (38:47):

So how do you think about a potential recession and the impact that it could have on your short-term rental business? How do you think it’s different than maybe traditional rentals?

Kirby Atwell (38:56):

Yeah, absolutely. And I agree 100% with what you just said. I think it is pretty risky proposition to buy, especially these luxury properties where you do the analysis and you’re like, “Wow, this thing could make 150,000 or $200,000 a year in revenue from Airbnb because there’s on a demand around it. And who cares if I’m paying $2 million for it because yeah, my mortgage is six, $7,000 a month, but I’m making 25 grand a month. So this is great.” But then what happens when there’s a recession or something happens with Airbnb, or something happens with another COVID, lockdown or whatever?

Robert Leonard (39:35):

Because those rates are like $1,000 a night. So I’m like, “How quickly? That is not going to be sustainable if something happens in the economy.”

Kirby Atwell (39:43):

Yeah, exactly. And those areas are pretty prevalent. Now, $1,000 a night isn’t like a crazy amount to ask in certain areas, but that’s not my DNA, I don’t buy in those areas. I think if you’re are independently wealthy outside of your Airbnb, like you’re a doctor who makes 400, $500,000 a year or more and you want to go buy a million dollar property and you know if that thing sat vacant 100%, I could cover the cost of it, but it’s just a great tax write off for me to own this thing, then do it. But I don’t think that’s a smart strategy to start there. I start with all my properties, like I said, are in a very affordable market where if I need to make them long-term rentals tomorrow, I can do that.

Kirby Atwell (40:26):

And they’re really nice long-term rentals and they’re furnished. And so I would do fine as long-term rentals, but they do significantly better as short-term rentals. And so that’s how I sleep great at night knowing that pretty much any scenario, I can still make the investment make sense.

Robert Leonard (40:43):

I want to talk about how you screen your potential renters. I think you’re probably going to say reviews is probably one of your main things because with the little bit that I’ve done of Airbnb and short-term rentals, that’s basically the main thing I look at. I actually utilize a little bit of their social media presence if I can get their info and find them. Just coming from a traditional investor background where I can run credit reports and background checks and talk to their current landlord and even call their boss, do all this real due diligence, sometimes tough for me to accept tenants at times. So I’m curious, what do you do to screen your potential renters? What is your criteria?

Kirby Atwell (41:22):

You’re right. I think the main way that I see is to look at their previous ratings from other hosts. And the thing is, it’s very difficult to fake a five-star rating from another host, Airbnb doesn’t allow you just to give fake ratings to people, you have to actually book a place, stay there and get a rating from a host. So is somebody really going to go through the trouble of booking an actual place from their friend to get a five-star rating so that they can book another place? For the most part, if somebody has five-star reviews, then we have not had issues with them. Every now and then when I talk to other hosts, I ask them about their experiences, and what most hosts agree with me on is it’s about one and 100 that is a bad guest.

Kirby Atwell (42:11):

And that’s as long as you’re screening, because there’s some hosts out there who set up their Airbnb and they say, “I just want as much revenue as I can, so I have no screening in place. Whoever wants to automatically book with me, they can automatically book.” And any scammer or anyone who’s looking to have a huge rage or party is going to target where there’s no screening. They’re not going to come to my property that doesn’t allow you to automatically book unless you have five-star reviews and reach out to me and say, “Hey, can you please let me book with you.” They’re just going to book with the ones that are available that aren’t screening.

Kirby Atwell (42:44):

And so they’re going to get the majority of the bad guests. So we’re already eliminating a lot of that just by not allowing direct bookings unless they have a five-star review. And then over time, what I always tell people is you start to develop this like spy sense when it comes to your guest requests, and the way people communicate is just off. And I always ask tons of questions because it’s my property. I can ask you lots of questions, why are you traveling to the area? Where are you from? If they live down the street and they’re booking a one-night stay at my property, I’m going to have a ton of questions for them, like, why do you really want to come to my house and not stay in your own for one night, and if you’re not going to have a party?

Kirby Atwell (43:25):

So there’s certain things that you can do to just screen out your big problems. And the vast majority of our guests will just be your typical family that wants to travel on vacation, stay for four or five days, has a great time, leaves the place decent and it’s cleaned and you never have issues, but you do have the one in 100, and what I always say is it’s very tough, especially in the beginning, it was so tough for me to swallow my pride if somebody came and… We had one guest who came and smoked weed in the house all night, and we had a turnover for a family the next day that was checking in and there was no way to eliminate that smell. And so I was so angry, I wanted to like punish that guest. And there’s nothing you can do, it’s a cost of doing business.

Kirby Atwell (44:08):

I could look at my revenue and say, “Okay, I made three, four times as much as I would if I had a long-term rental this month and every month before that. So there’s a little bit of a cost of doing business here and I’m going to just accept that.” And so we had to apologize to the guest who was checking in, give them a discount, and it was what it was. But it’s a very rare thing as long as you’re being diligent about who you allow in.

Robert Leonard (44:32):

I laughed a little bit when you talked about the people booking locally, because I didn’t even give that a second thought. I listed my first Airbnb, hadn’t given it any thought, didn’t even cross my mind. And then I was on a Facebook group one day and somebody was talking about how they refused to book to anybody local and that piqued my interest. I clicked on the post, I started reading some of the comments to see if I could learn why. And I learned exactly what you said. People are only going to book locally if they want to throw a party or maybe not even a party, but do something at your house that they’re not going to do at their own house.

Robert Leonard (45:03):

It was interesting. I hadn’t even given that any thought. So if anybody’s listening to this that hasn’t thought of that before, if you have short-term rentals or if you’re going to get into short-term rentals, it’s just something to consider. What if they don’t have any reviews? What if they’re new to Airbnb or even if they’re not new to Airbnb, they’ve had an account for a while, they just got no reviews. How do you handle that?

Kirby Atwell (45:21):

They cannot direct book with me automatically, but they still can message and inquire and request to book. And so a lot of people still do and a lot of people will say, “Hey, I’m new Airbnb, I saw you only rent people with previous reviews. Is there anything you can do?” And so we say, “Yes, actually, there’s two things. You can either somebody from your party, who’s traveling with, you can message us from their profile that has positive reviews and book through their profile. Or you can put down a refundable damage deposit. And a lot of times we don’t even collect the damage deposit, we just want to see what their response is because if their response…

Kirby Atwell (45:59):

Typically it’s, “No problem, I’ll put down the deposit.” And if that’s their response, half the time we collect it, half the time we don’t depending on other aspects of this day. But if their response is, “No way, I would never put down a damage deposit,” there’s only one reason I can think of if you don’t want to put down a damage deposit, you’re going to damage the place. So then we just say, “Sorry.” I would rather not have the place booked than feel like, am I gambling with this booking. So yes, that’s how we handle it.

Robert Leonard (46:31):

You mentioned earlier that Rich Dad, Poor Dad had a big impact on your life, but other than that book, what has been one of the other most influential books in your life?

Kirby Atwell (46:40):

Man, there’s so many. There’s one actually that I just read recently that I incorporated into my business that I think is really been helpful for me and I think a lot of other people listening to this would be, this book actually right here, Profit First for Real Estate Investing. A lot of people have heard of the original Profit First by Mike Michalowicz that outlines the system of taking all your income, putting it in one account, and then you create a percentage for your operating expenses, a percentage for your profit, for your taxes and every twice a month, you move those percentages into those accounts and then you just operate from those accounts.

Kirby Atwell (47:17):

And that’s amazing how that opens your eyes to understanding what’s going on in your business as opposed to the way I ran the flipping company where we had $12 million in a lot of different places all funneling into one account, and we really had no idea what was profit, what was other people’s money. We were tracking on spreadsheets, but in real time, we were guessing. So what this book did is, Profit First, the original version was difficult to conceptualize for real estate investors because there’s the things like other people’s money that are sitting in your account that other types of businesses probably don’t have hundreds of thousands of dollars waiting for a rehab.

Kirby Atwell (47:56):

Or if you go over on a rehab, how do you handle that? What account does it come out of? So David Richter just wrote this book and it’s how to implement the profit first system for real estate investing, and it’s a really great book. There are some things in it that really helped my business stay organized.

Robert Leonard (48:12):

Did the author of that book partner with Mike to write that?

Kirby Atwell (48:15):

Yeah. He actually has several different authors who have written industry specific.

Robert Leonard (48:21):

Yeah. I’ve seen like Profit First for like contractors. And I don’t know if you’re familiar with The Millionaire Real Estate Investor, but they do the same thing, there’s Millionaire Real Estate Agent, there’s a Millionaire Contractor. There’s a couple different series that are in the real estate world that do the same idea. I actually hadn’t heard of the real estate one and I felt the same way, Profit First, I love that book. I don’t know if I’d say it’s one of my favorites, but it definitely is a really good book. And I’ve had Mike Michalowicz on the show here twice, once actually recently. So I do really, really love like the book, but I had the same disconnect that you did where I had a hard time connecting it to real estate.

Robert Leonard (48:54):

I said, “All right, in the podcast business or any other type of business that I have that’s not real estate, I can see how I can apply this, but I’m not 100% sure how to do it in real estate.” So I’m going to have to go pick up a copy of that book.

Kirby Atwell (49:06):

Yeah. It’s a great one.

Robert Leonard (49:08):

Before we give a handoff to where people can find you, I like to wrap up the show by turning the tables and letting the guest ask me a question. So Kirby, what question do you have for me?

Kirby Atwell (49:18):

I recently had the privilege of having you on my podcast, so I had the chance to ask you lots of questions in that format. And I guess what stood out to me was how profitable the RV rental space can be. So I guess, what is the next step for you? And I don’t even remember exactly if I asked you how many RVs you’re renting out right now, but it sounds like you’re starting to scale that company. So where do you see that going and what’s the long term goal with the RV rental business?

Robert Leonard (49:52):

It’s interesting because when we chatted, I had mentioned, if you have the option of buying a rental property or an RV rental, I’ll tell most people buy a real real estate rental property not an RV. And so for me, I’m at this crossroad or this dynamic where I can buy rental properties or I could scale the RV business, or I could do both, but really, it’s like, I could to do either one. So I’m trying to know if I should take that advice and just continue down the real estate path and scale that. Then the entrepreneurial side of me, the shiny object says, “Okay, this is really profitable.

Robert Leonard (50:22):

I want to buy five, six, seven, eight, nine, 10, 20 of these things. I’ll buy a small lot, not for a ton of money. I live in a pretty big city, I’ll buy a small lot of land though that’s not developed and I’ll cut down the trees, I’ll pave it. And then I’ll just park all the RVs there.” So that was my first thought. And then I was like, “Well, if I’m going to do that, why don’t I just put a self-storage building on that paving and then I’ll have all the RVs next to it. So then I have the real estate piece and the RV, and then I have both businesses.” So I could scale it to something like that. I might even just keep it to two or three, maybe four of them and just do it myself and not scale it much past that because the real reality is I think it could probably generate consistently between two and $3,000 a month over the year that’s adjusted for seasonally.

Robert Leonard (51:04):

So even in the months where you don’t make anything, just overall, say two to 3,000 in my area. So if I bought three or four of those, that’s six to $8,000 a month in profit off just three or four of them. Now, if I got to that level, I don’t know if I could stop there, I think myself, I’d probably just continue to scale, but I don’t know. I guess I’m not 100% sure. I got to really sit down and really map out exactly what I want that to look like. So those are some of the avenues that I’m considering and hopefully within the next three to four months I’ll know more clearly how I want to scale.

Kirby Atwell (51:35):

Yeah, that’s interesting. And I think those questions never stop, that you question yourself like, “Is there a tweak I can make to my process or to the way I’m investing to increase my returns or a new type of investing?” And I think any type of investing can work as long as you go all in on it and figure out the nuances of it. And so I think that RV rentals is a good demonstration of that.

Robert Leonard (52:06):

I just have to decide, we talked a lot of on your show about the appreciation aspect where with real estate, I love that I have five, six rentals right now that in 20 years when they’re all paid off, there’s over a million dollars sitting there in equity that I didn’t put any money into, whereas with RVs, that’s not going to be the case. So with the rentals, I’ll make two, $300 per door per month, which is great, but I have that pot of money sitting in 20 years for over a million dollars versus the RVs where I might make three, four, five, six, seven, eight, nine $10,000 per month in profit, but not really any equity waiting for me in the next five, 10 years, you’re just not getting any appreciation with those, it’s a depreciating asset.

Robert Leonard (52:46):

So, just this dynamic that I got to balance, and really any RV investor is going to have to consider for themselves. But Kirby, I’ve really enjoyed our conversation today. I have a bunch more questions we just didn’t get to today, so we’ll have to invite you back on the show for a second episode. But for those who heard this one and they’re interested in what you’re doing, where can the audience go to connect with you?

Kirby Atwell (53:08):

I’d say the best place is livingoffrentals.com/start. On that page, I basically have laid out exactly how I do vacation rentals, so you can get a lot more information there because I work with people to help them get their first vacation rental and walk them through that step by step. So you can find out all about my process, they’re livingoffrentals.com/start.

Robert Leonard (53:32):

Awesome. I will be sure to put a link to that resource in the show notes for anybody that’s interested in checking it out. Kirby, thanks so much for joining me.

Kirby Atwell (53:40):

Thank you. Good talking to you.

Robert Leonard (53:41):

All right guys. That’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro (53:47):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.