Isaac French (04:39):

When I was 19, I got that credential. And then just kept kind of growing the number of personal tax returns. I was doing small business returns each spring. And then few years ago, 2020 actually, I launched Accountable. And the idea there was the concept it’s cloud-based accounting business, kind of running the whole gamut from data entry and categorization to accounts payable, payroll, tax planning, and preparation. We wanted to basically bundle all of these services together into one fixed fee package.

Isaac French (05:10):

So kind of a subscription based model. I was working with another friend of mine and we had probably… We grew it to about 15 smaller businesses that we were doing this for. And those monthly fees ranged from 500 to $1,500 per month. I learned a lot through that. It was a great process just for… I think bookkeeping as a whole was a great exercise in learning business and understanding numbers and how management works. But definitely it’s not my passion. I’m not the kind of guy that is just going to be staring at numbers all day behind a computer. I wanted to be diversified.

Isaac French (05:47):

Actually, I just sold my interest majority interest to my other business partners. So I’m completely out of accountable now, but like I said, it was a great experience and something to put on my resume. That’s that.

Robert Leonard (06:01):

This story, when you talked about it on My First Million stood out to me for a couple reasons. One, because when you said that you wanted to start this because you wanted to see how other people were making their money, how much they were making, et cetera. I couldn’t help but laugh. Literally, I was actually up at my family’s camp on a lake here in New Hampshire and I was playing Cornhole and I was listening to this while I… I was listening to the podcast while I played Cornhole and I stopped playing for a second, because I just started laughing to myself and I was like, “Oh my God, that is literally…” I’ve thought about doing the exact same thing for the exact same reason like I want to get into this. I thought about getting into this tax realm a couple years ago for the same reason.

Robert Leonard (06:36):

So it’s just too funny to hear. I had a couple questions about the enrolled agent because I thought about that. I was very close. I have a credential called the CMA. It’s very similar to the CPA, but again, not auditing or tax, or anything like that, but I was very close to going the CPA route. So I’m very familiar with that. I thought about getting the enrolled agent instead when I chose not to become a CPA. I was curious, was it hard to get people to trust you as an enrolled agent versus a CPA? Do they see you as a second tier. Is it really the same as being a CPA from a tax side?

Isaac French (07:07):

So that’s what everybody tells you, it’s the same. The bottom line is nobody outside the industry knows what enrolled agent means. You have to do a lot of explaining. Whereas CPA is pretty self explanatory. It’s a very, very common colloquial term even. From my experience, and I never was… The thing I loved about taxes or one of the things I loved about taxes from the start was that I could really research any subject, any particular niche inside of tax planning and prep… On a case by case basis, I didn’t have to know… I mean, I guess I suppose this is the case with a lot of things, but especially with taxes, there’s so much information just from the IRS website to Google.

Isaac French (07:44):

I mean, it’s all there, obviously. I never felt like I had some super great grasp on everything after going through this three pretty hard tests. One of them is pretty hard business test you have to take to get that credential. I felt like I’m just really good at test taking. I think in general I like tests. So there were a lot of gray areas for me, but my approach was just like fake it until you make it. And when you get to those situations, research it really, really well, and then you learn.

Isaac French (08:10):

That’s kind of what I’ve done. I think it’s a good approach to have in investing and in life in general. You don’t want to be too self-competent and overconfident, but you need to be able to sell yourself and get into positions where it’s forced you to research and to learn and to grow because you have to and then you gain all those experiences and that knowledge, and you can take that into the next opportunity.

Isaac French (08:30):

So to answer your question, yeah, I don’t think it’s quite on par with CPA. It technically is as far as the tax side of it, but CPA, it’s a lot more rigorous in the sense that you have to have the accounting degree. Plus what is it? There’s four main tests, right? Plus, there’s an internship a couple years. It depends on the state. And the enrolled agent is just three big tests you have to take. You can take them whenever you want, however you want. Or another alternative option is you can… I think it’s if you work for five years as an IRS employee, you can also basically come out for that. It’s a little different process.

Robert Leonard (09:05):

It’s definitely interest me. Like I said, it’s just not really going to help too much on the real estate front, which we’re going to talk about now. But it was just definitely something that I’ve been interested in. I think there’s probably some people in the audience that have probably considered that. Now along the same kind of vein, and going back to your business that you sold your interest in, there’s a popular real estate influencer. You probably know who I’m going to be talking about, but on Twitter he commonly says that real estate is not a place for people with no money.

Robert Leonard (09:31):

He says there’s gurus out there. There are people that’ll tell you that you can invest in real estate with no money, but he doesn’t believe that to be true. He thinks you should make your money other ways and then put that money into real estate. Was that your approach and your thought process as you did your accounting business and transitioned into real estate?

Isaac French (09:47):

I didn’t really plan it to be on a pretty spontaneous. Just to back up and look at the bigger picture, I’ve been very entrepreneurial since I was literally a little kid. I mean, when I was five and six years old, I had all kinds of businesses and was writing books, quote-unquote and catalogs and designing products, and designing logos. From a very early age, I was very interested without even knowing what the term was. Being an entrepreneur and dipping my feet in the water all over the place.

Isaac French (10:15):

Also, I think just being in the family, I was in with parents that were entrepreneurs and just a very creative and exploratory kind of context foster that. I mean, my dad has been doing real estate since long before I was born and I was party to that and even did bookkeeping at times and then of course did tax advisory along the way. So I always knew I was going to be doing real estate. It just makes a lot of sense. It’s tangible, real property that over time always appreciates. It’s kind of a win-win and has a ton of tax advantages.

Isaac French (10:47):

The accounting thing, at one point I definitely had big designs for it, and I still think the concept is just amazing. There’s been a couple companies that have tried this concept and have raised a lot of money, and are succeeding. No one is really dominating in that space. There’s bench accounting. There’s also been, unfortunately, some failures from some startups. I originally wanted to grow that to a thousand clients within five years when I first started. And I think I have this tendency too, which can be a little bit of a liability and it’s something I’m always working on, but I get so hyper focused and passionate about whatever it is that I’m pursuing at the moment that, I mean, I really am… I believe in myself and I’m going to take it a long ways.

Isaac French (11:29):

Obviously, I didn’t take that business to its full potential. Now, looking back, I’m thankful because I really wasn’t. And so I think you got to have that mixture of being super passionate and dedicated and focused, but also not taking yourself too seriously. I was fairly young in my early 20s too, so I didn’t have a lot to lose. There was no overhead initially. So no, I didn’t plan the current space that I’m in, not found anything else [inaudible 00:11:53] and marketing too.

Robert Leonard (11:55):

Well, now one of your passions is real estate and specifically short-term rentals, Airbnbs, things like that. So the first thing I want to touch on is one of your most popular tweets where you said I automated my vacation rental property, which brings in a million dollars per year. I’m saving over $150,000 a year on management fees and it’s fully optimized, much more efficient and better marketed than if I were to hire a property management company. Expand on that a bit for us and explain how and what you did to automate that property.

Isaac French (12:26):

As we were designing and building the property, which we did in nine and a half months from starting to finish, I was researching a lot of these dynamics and topics because I didn’t have any experience prior to that. I had heard of some of these tools, but had no firsthand experience. One thing I knew I was going to utilize is smart home technology. We installed smart door locks, smart thermostats, smart noise sensors, smart lighting, smart switches for lighting. And then we have a hub, a SmartThings Hub from Samsung that they all sort of talk through.

Isaac French (12:59):

And then a software called Operto which integrates directly with my property management software just called Hostaway. So it knows every time there’s a reservation, anytime someone’s coming, anytime someone’s going. It adjusts the temperatures accordingly. In the off time, it expands into a wider range depending on if it’s hotter or colder outside so that you save energy.

Isaac French (13:22):

We have very little off time now, but it’s usually just during the cleaning. But on average, I think that you can save 20% energy costs just from that. And then door locks, unique codes populate in the messaging, which I have automated and sequences that I’ve optimized to our particular stays and each particular unit. So we have unique codes that populate in those messages for each individual stay that only work during the stay itself. The lighting does the same thing.

Isaac French (13:48):

Turns on right before the guests get there, turns off after sunset. And then we have a dynamic pricing tool which I’ve spent a couple months figuring out and tweaking now to you set your base rate, you set all these parameters, minimum price, minimum length of stays. Last minute discounts, far future premiums, all these different variables you set. And then it uses a smart engine AI essentially to learn what the historical averages are, what the local market demand is. It constantly is updating. It knows what the local events are and therefore prices you at the perfect price point.

Isaac French (14:21):

So this has allowed us to hit like 90 to 95% occupancy by optimizing these rates. It also allows us to like really capitalize when there’s high demand times like home football games or just local conferences or whatever it might be. All those components together have really set me up into a great spot now. I do have two part-time people. So I’ve got a maintenance manager. Pay him like 200 bucks a week. I’ve developed a very defined scope of responsibilities for him, including preventative maintenance and just also eyes on the property because I’m now traveling quite a bit. I’m not around.

Isaac French (14:58):

He goes by once a day. And then I have a guest communications manager who’s monitoring messages. Obviously, like I said, we have automations in place, but there’s always going to be some level of human interaction necessary. So we try to cut that down based off of adding pertinent information in the messages, sending them at the right times, but they’re there as a backup. And then I also take a lot of inquiries and questions from the website, social media.

Isaac French (15:22):

I think I put it in a tweet, but I’m spending about $25,000 a year on all of that from the software to the people and a traditional property management company is going to run anywhere from 10 to 25 to even 30% of gross revenue. So at a million dollars gross revenue on that property. That’s anywhere from a hundred to $300,000. So it’s a huge savings there. And really, I’m kind of a micromanager in the sense that I’m going to understand everything that’s going on. That doesn’t mean I’m going to be doing all of it. But at one point to start with, I’m going to figure it out back to what I was saying about taxes.

Isaac French (15:56):

Being able to set all these different things up and get the ball rolling, and then just hire people for those very defined scopes was a huge benefit. I realize not everybody has the time nor wherewithal to do that. I’m sure there’s also others that are much better that just specialize. I try to work with those as well. I mean, I had plenty of people advising me that I sought out that were more familiar with this space. But I’d highly recommend it.

Isaac French (16:21):

I plan to do a course maybe on that to unpack all of that because there’s a lot of nuances and just complexities when it comes to setting assistant base. And I’m still learning, still optimizing. It’s working really well though.

Robert Leonard (16:33):

How much would you say your initial investment was to make all of these automations happen? And if you consider that initial investment versus what you’re saving on property management fees, what do you expect your return on investment to be or your payback period?

Isaac French (16:46):

The initial investment was only thing… I mean, it was simply the smart home components which is not much. I probably spent maybe a couple thousand dollars on the hardware and then literally it’s mainly just more intangibles at knowledge experience, figuring out what works for your system and then putting that in place. The payback is pretty instant. It’s more of a time investment and you have to be willing to venture into territory that for most of us, for me was very unfamiliar. Just understanding how all these… One of the hardest things is there’s a lot of software competitors in the space from the smart home to the property management, to the pricing.

Isaac French (17:21):

So trying to find that thread that they all talk to each other and the perfect package and work the way that you want them to work and talk to the hardware that you have. That was kind of difficult. I spent quite a bit of time and just researching because some of them, they’re not all established companies. So I wanted to choose businesses softwares to work with that I could really rely on and not have to, from a customer support perspective and also just in the long term, just not having to switch back and forth between them. I spent quite a bit of time there and made some pivots along the way, but mainly a time investment. The hard cost is very minimal to do all that.

Robert Leonard (17:57):

Given the hard costs, the time investment, even the complexity that it takes to set this up, do you think it makes sense for all air Airbnbs and all short-term rentals or would you only apply this approach to the ones that are a little bit larger and more upscale?

Isaac French (18:12):

One other important component I did not mention is cleaners. They’re really the lifeblood of your business because you can invest millions of dollars in design and construction, create an incredible property and a brand and marketing. And that’s going to go a long ways. But I mean, if it comes down to a dirty toilet that didn’t get cleaned or whatever it might be, hair on the linens, on the bed, you’re kind of shooting yourself in the foot. All that is for naught because you’re going to get a bad review, bad experience. Finding quality cleaners and setting that team up is paramount importance.

Isaac French (18:43):

And then also for them to integrate with the system, I keep talking about like they have access to my PMS. They can see the reservations, they can see notes that get put on the reservations. They communicate with the guests directly to let them know when their cabin is ready for check in. So they’re doing a lot. And I’m compensating them for it on a piece work basis. But that being said if you have individual properties or one individual property.

Isaac French (19:06):

I think I’m the kind of person that absolutely, I think it’s always worth it just because you learn, especially if you have intentions to grow that portfolio, you’re learning all of this very valuable knowledge. However, I get it that there’s a lot of people that don’t have the time. Like I said, they don’t have the energy, the resources, the wherewithal, the mental… Just they don’t want to have to worry about it. So they pay their 20% to the property management company.

Isaac French (19:29):

I am so not that person. After making an investment of this size and being this thoughtful and intentional about every part of it, the last thing I wanted to do was just hand it over and expect some other company to figure it all out. I think it depends on the person, but my recommendation is always going to be dive in, make yourself uncomfortable, figure it out. It’s going to benefit you.

Robert Leonard (19:50):

Since you’re doing this all remotely for your own property, have you considered just doing it for other people and being that property management company?

Isaac French (19:56):

No, I’m not going to be… I do not want to become a property management company. What I do want to do is teach people how to do this themselves from actually backing up to the whole… From the design to the construction, buying the land to design to construction, to setting all this management systemization in place to the marketing. I’ve done all that now and I’ve learned a lot and there’s a… What I’m finding is there’s a huge demand. I mean, I wasn’t even on Twitter a month ago. I just created a Twitter account and had just really seen this huge interest there as I’ve began to put information out.

Isaac French (20:26):

A lot of it is stuff that I’ve taken for granted that I know. I feel like there’s such a high ceiling for the potential of what I can still learn when it comes even to this particular niche of short-term rentals. What I’m realizing is there’s a lot that I’ve picked up along the way just from doing it even if it’s only been once from start to finish. Really, really comprehensively, I’ve learned a lot. Even with Twitter, I’m trying to back up and break that down and not take anything for granted. I’m finding that there’s just a huge demand and appetite for this information.

Isaac French (20:56):

I actually just started doing consulting on the side, just booked several calls already. I’m currently charging $600 for an hour long call. I may have to raise that. I’ve already raised it once just based off demand, but I’m not even… I don’t want to do consulting full time either. The plan there is to get a feel for what the most common questions are that people are asking and then use that information to build a framework for a course that I want to do, an online course that will teach people this whole process because it’s really the only sustainable way that I know to teach because I’ve just had such… I’ve been inundated over the last three or four weeks since I first got out there as far as what the project was and how we did it.

Isaac French (21:36):

I’m really excited about that actually. I have a lot to learn even when it comes to making a course and consulting people, but I’m really excited about that.

Robert Leonard (21:44):

How did you find those cleaners? I know a lot of people listening are probably going to have that question. So how did you find not only a cleaner, but a great cleaner that is willing to go above and beyond? What it sounds like you’re expecting them to do is above and beyond. So how did you find that cleaner?

Isaac French (21:57):

Initially, my wife and I were, like I said, pretty committed to doing everything from the maintenance to the cleaning. Not in the long term, but we wanted to understand it. So she was doing the cleaning for the first week with a friend just so that we could create punch lists. Once again, create this defined scope. Then we had some friends that were great, but they were a little too flexible with some of their other commitments. So it was very hard to constantly be coordinating. We had seven units. We had check-ins on all seven days. And it was just almost honestly a full-time job for us trying to coordinate between them.

Isaac French (22:28):

So we realized we needed to find really one party for this. I actually just went on Facebook and searched cleaners in Waco and came up with six or seven different people and called every one of them. No one answered me on the first call. I left a nice message for them. Several of them called back. The one we ended up hiring was actually… They weren’t even advertising someone else. I found a discussion or whatever it is on Facebook where someone else had been asking for a cleaner and someone else referred this lady.

Isaac French (22:56):

She doesn’t really advertise, but she had a number. Anyway, then we met on site and just wanted to feel it out, see if it was a good fit. And she seemed very competent and very responsible, very stable, which is all of those were boxes that we needed to check. And we hired her. I was fully anticipating to just see how it went. I didn’t want to take it, over commit. And for both of our sakes, wanted to see how good the fit was. And started her off at four days a week. And then we had friends doing the other days.

Isaac French (23:25):

We have a friend that does two days and then we have this lady does five days just because this friend, it’s a good little income opportunity for her. Eventually we’ll probably just shift it all over to the lady that does most of it. But yeah, she’s been awesome. She has a crew of three different people that she relies on, but she’s there pretty much every time if she needs to be, but they’re fully trained. So they have a deep stack between the three of them. They don’t all have to be there at the same time.

Isaac French (23:50):

They’ve been really, really reliable. However, if something does come up or they change their mind or… We’re both very, very happy in the arrangement. They’re getting more than they usually get. We are getting great, reliable, help, but if something were to change, then I’ve kept the prospects open and kind of have a pool of people that I can potentially use as a backup or pivot to. So right now it’s going super well. But yeah, Facebook is a great resource for finding cleaners, I think.

Robert Leonard (24:16):

Did you find the maintenance individual or people the same way?

Isaac French (24:20):

No, that was actually a friend of mine and he’s an electrician that worked for the company that did the electrical when we built it. I knew him personally as a friend, but then also he had experience with the property and it’s perfect for him because he works in the area. He’s kind of a crew supervisor. So he doesn’t always have to be at the same place all the time. He kind of jumps around a bit. So it’s perfect for him because he could kind of be on call. He’s just a go getter kind of person and wanted to take it on, so I’m paying him 800 bucks a month.

Isaac French (24:49):

He doesn’t do much of the work himself. He’s mainly just kind of responsible for it like the mowing scope or the power washing or the window cleaning. I have subs lined or all that and he just coordinates with them, but he takes it completely off my shoulders, so I don’t have to worry about it.

Robert Leonard (25:03):

Another thing you tweeted was that your property cost you about just over $2 million to build about a year ago. And now you’d say it’s worth over 5 million. Break this down for us and explain how the value went from just over 2 million in cost to over 5 million today?

Isaac French (25:19):

First off the cost was 2.15 and I was the designer and the general contractor. So just those scopes alone from a cost perspective, if someone else were to do it, assuming they had the big vision that could match what we did, both of those fees are usually 20%. That would’ve added 800 to a million right on top. It would cost someone else at least 3.1. Like I said, there’s a bunch of if baked into that. From a market valuation perspective, more specifically from an income approach perspective, and I realize this is very subjective. When I say 5 million, I put that in the tweet. That’s subjective to me. It’s worth what someone else is willing to pay for it. But at this point we’re not going to sell it for less.

Isaac French (26:01):

But where I’m basing that off of is we’re on track to gross over a million dollars this year. And we have roughly 500 or just north of 500,000 of that is EBITDA. So earnings before taxes or interest on the loan. From a simple 10X… From like 5X revenue, that’s 5 million. 10X profit, that’s 5 million, just over 5 million. There’s a lot of components that go into that as far as that, I think, give us the valuation. So the real estate let’s just say is worth 3 million easily.

Isaac French (26:33):

The business and the brand that we’ve created. I mean we have 42,000 followers on Instagram, very engaged audience. We have 60 to 70% mainly because of that Instagram audience, 60 to 70% of our bookings are direct coming through our website, which is a huge advantage. We make 10 to 15% more profit on those bookings. We own the customer data so we can mark it back to them. We have 2,500 people on our email list and growing. So we have this very vertically integrated, robust marketing package and valued to the business here.

Isaac French (27:07):

There’s a lot of properties that get listed on the market that say Airbnb business and you’re buying the business. They’re trying to charge you this massive premium for that, but they don’t really have anything unique, specific, bespoke to them. Any systemization, any branding, any marketing in place that really justifies that in my opinion, they’ve listed on Airbnb and they’ve gotten their year of bookings or whatever it is.

Isaac French (27:33):

I think we’re a lot different for those reasons I just gave. But we’ll see. I think we’re also still have potential upside, potential as far as how much gross and net income we can bring in at this property. This is our first year. I mean, we just launched at ground zero in January. We had no bookings before that. We had no following. I think next year we even have greater upside. One question I’m getting a lot these days and maybe this is something you’re wondering too, but just considering and being conscious of the greater macroeconomic environment that we’re in with a recession likely or already in a recession.

Isaac French (28:06):

I don’t know what metrics you use, but everybody’s talking about this. A lot of people wonder, how is this going to affect you? Is this going to hurt you? That’s the common assumption that this is going to hurt everyone. I think time will tell. I’m going to keep a low profile and just tread lightly and not overcommit. And even in my projections of these are projections, I’m fully aware of that. But my personal feeling is that if we are in a recession, depending on how bad that is, but assuming it’s not Armageddon, I think that we’re actually going to benefit from that in a lot of ways.

Isaac French (28:38):

I think there’s a lot of people nearby within a two hour radius of us. Really an hour and a half radius, there’s what? Like 10 million people in the Dallas Fort Worth metroplex and in Austin. Those people are looking for… First of all, in general, they’re prioritizing experiences. The world gets crazier actually. One, to spend time. These people want to reconnect with nature as life gets faster and crazier and busier. So we’re going to benefit from that in general. I think there’s just going to be a lot of people that instead of taking an overseas vacation or going a long distance or spending a lot of money and taking their four-week vacation or whatever are going to take a shorter vacation, a staycation, are going to find places within driving distance.

Isaac French (29:18):

So being in a position where we really do stand out, there’s nothing like us around, probably in the state. And it’s not just me saying that. I mean, we’ve had a ton of guests saying the same thing. I think we’re going to benefit from that. We’ve had a ton of guests say, “I can’t believe this exists here. Does not feel like Texas. This feels like you’re in your own little world. This feels like Europe. This feels like whatever. We’re going to come back every single year to make a family reunion out of it. Companies are going to have corporate retreats here.”

Isaac French (29:44):

So there’s just a lot of different ways that we can benefit from being able to cater. For one, being able to cater to such a diverse spectrum of guests from honeymooners, to individuals, to business travelers, to families, to family reunions, to corporate retreats. We can cover the whole spectrum. But then also just being within this proximity to these large population bases that are underserved when it comes to natural scenery and amenities and things to do. That’s my personal feeling. But time will tell them that.

Robert Leonard (30:12):

What are you charging for nightly rate? I’m curious because of this recession talks, I’m curious if you’re an nightly rate is something that might be affordable during a recession for people.

Isaac French (30:20):

So right now I mentioned we use dynamic pricing to optimize our revenue on average to give you a sense though. We are at including cleaning fee and taxes, we are at about $320 for a weeknight all in and about 400. Well, about 500 or 550 on average for a weekend night. We’re at 90 to 95% occupancy at those prices and climbing. But to give you just a little bit more context, as far as a recession from the investment point of view, we can lower…. We just refinance the property.

Isaac French (30:56):

We locked in a 25-year amortization. So our debt service is about 180 grand a year. It’s about 15,800 a month. Right now we’re at 5.55%. Picks for five years. We could actually lower our rates by 65 to 70%. We could lower gross rents by that much and still easily cover our debt service.

Isaac French (31:19):

Worst case scenario, we will do that. But we’re still in, I think the best position of anybody around as far as… We can still lower our rates and we’ll definitely be the best place that people want to come. Or in the top five places in the state probably people want to come. We’re in a great position there. I mean, yeah, if worst case scenario happens, we’re going to lose some margins and I’m fully expecting that that’s a possibility. I honestly don’t think that is as likely as staying stable with where we’re at just because right now we’re still seeing an increase in demand.

Isaac French (31:48):

We’re raising our prices currently as more people find out about us and people are definitely spooked by the… It’s not like people don’t know that there’s something on the horizon or people’s jobs aren’t already being affected. There’s a lot of posts I have heard especially in the last month that are just complaining that bookings have tapered down so much. And I think a lot of this has to do with Airbnb had an update that a lot of hosts don’t like. I actually like it a lot. It very much prioritizes, really unique and experiential based stays.

Isaac French (32:20):

So it’s basically requiring everybody to up their game. It’s benefiting us right now. I think that actually is the reason for some of the fact that June was a slow month for a lot of hosts. But then also I do think that there are people that are reconsidering their decisions as far as how much they’re going to spend or where they’re going to go. I’ve noticed this myself. I made a tweet about this, but I haven’t actually tweeted it.

Isaac French (32:43):

I wrote something up about this. But as far as pricing strategy, the booking window has shrunk considerably. Just in the last three or four weeks, I’ve noticed this. So people are now booking two to three weeks out versus four to eight weeks out on… I mean, like a lot of bookings or less than two weeks, big bookings. So we’re adjusting our pricing accordingly.

Isaac French (33:01):

We’re not dropping them so soon. We’re dropping the rates at last minute, literally to account for that. And I think that’s because people are unsure of… Like I said, they’re unsure of what’s going to happen and they’re still willing to spend money, but they want to just put the breaks on and consider. And also as some people have commented about the Uber effect taking place here in the short-term rental market, which basically is when Uber first started, the concept was pretty novel. It was very new and guests or clients had expected 10 to 15-minute wait times when they booked their Uber.

Isaac French (33:34):

Mentally, that’s the way they operated. They would just think in such a way that they’d book it in advance. And then as more and more drivers got online and it became more and more ubiquitous, that time shrunk all the way down to now. I mean, if you wait three or four minutes, that’s a long time. As more and more rentals have come on the market nationwide, globally, I think we’re seeing some of that take place as well.

Isaac French (33:57):

Richard Ferdig made a really awesome thread on that on Twitter. So it’s a combination of all of those things, but yeah, I don’t think it’s going to negatively affect us at this point.

Robert Leonard (34:05):

I mean, 350 to five 50. I mean, it’s a lot of money per night, but I mean, realistically, I have some friends and some people that I know in the industry, they charge upwards of a thousand, 1500, even more than that, 2,000 a night. I mean, 350 to 550 is a lot, but it’s not that crazy when you think about some of the other more expensive luxury Airbnb. That’s interesting. You mentioned the refinance. I want to talk about that, or you just put debt service on us. I do want to talk about that. But before we do, I’m curious, how did you fund the acquisition? Did you pay cash? Did you use a construction loan? Did you use a bridge loan? How did you fund this acquisition and construction?

Isaac French (34:42):

I had some savings about 100,000 that I was able to buy. When the property came up for sale, it was just so perfect for my needs. I mean, it was just at the right time, the right place. It couldn’t have been more perfect. So when I found out about it, I mean, I made a cash offer that day, which was accepted and went from there. But yeah, we paid cash for the property. It was only $138,000. And then this is probably the number one question. So you’re the first person and your audience is going to be the first people to hear the answer to this. I’m going to make a threat about this eventually. But as far as how I finance this, I mentioned my family has a construction company, which I’ve worked in for several years. They’ve grown that substantially. I think it grosses about 15 million a year.

Isaac French (35:24):

So they had a line of credit actually through that business. When I pitched this idea to them, they lost equity in exchange for some liquidity in the short term. So they ended up taking 40% and basically an exchange for, I got $800,000 up to $800,000 of short term liquidity that I then could use to leverage off of a construction loan.

Isaac French (35:47):

I mean, I was on such a fast timeline that I immediately started drawing from that amount to start construction, to start the process while I was in tox with a bank. I had to try three different banks before I found one that was willing to trust me and trust the vision that I had for it, which was really frustrating. When I finished the project, I was like, I sent a nice, but a little bit spiky email to them. I was like, “Well, this is what we did and this is how fast we did it, and this is how much money we’re making. It’s too bad you weren’t a part of it.”

Isaac French (36:14):

Banks, some of them were just like that. It’s so frustrating. They’re not willing to take any chances. But I did find a local one that was. With them, we got… Especially using my brothers and my dad as guarantors alongside me since they just had a lot more stability and liquidity, enabled me to get a construction loan. 80% loan to value. They appraised the project at 1.5 and it cost us 2.1 to build, let alone the values.

Isaac French (36:39):

So, I mean, the appraisal industry is just very behind the times when it comes to real estate valuations and even just straight up costs building costs. So it was a good thing that we had the extra cash that we could use, but we got the construction loan in place two months after I started construction. In the meantime, I was just finding everything off that line of credit, but used that 800,000 or so plus my savings as the difference that we needed from construction loan to overall cost. And that was at 5.5%, both the line of credit and the construction loan.

Isaac French (37:10):

We were borrowing at 5.5% in 2021. And then we just literally signed the papers and closed a couple days ago on refinancing it. We were very anxious to get that done as soon as possible because with interest rates doing what they’re doing, we actually had our loan repriced. So we had a commitment from the bank at 4.95. And then after that 75 basis point hike. They came back and said we cannot do it. We have to go up to 5.55. Overall, I still think that’s pretty great. All things considered I’ve heard a lot higher. And especially looking at the historical averages as you know, they’re much higher. They’re like 7% on average.

Isaac French (37:45):

I think we’re in a good position. I think at the current rate, we’ll be able to pay it off within five years if we need to, but with inflation doing what it’s doing, we’re just going to keep and with a possible future project in mind, we’re just going to make our monthly payment and keep reserves. And if we need to pay it off, depending on where rates are at in five years, we’ll reevaluate that then.

Robert Leonard (38:07):

What did their valuation come in at when you did the refinance?

Isaac French (38:11):

They valued it three ways. It was the same company. They used the cost approach, an income approach and a real estate value approach. And then they aggregated them and came up with a middle. The lowest was like 2.8 and the highest was like 3.4. So 3.1 is the final number that they went with. So we refinanced 80% loan to value on that which is 2,480,000. So we pulled out about $400,000 of cash and then paid off the initial construction loan line of credit.

Robert Leonard (38:45):

So did you have any money left in the deal or is that 400 extra that you didn’t put into the deal?

Isaac French (38:50):

No, that’s 400 completely on top that we didn’t put into it. After paying ourselves off, we all personally loaned some money as well, just to get the project over the finish line. So we paid everybody off. And so our tax basis is zero in the project, all of us as partners.

Robert Leonard (39:05):

When you were buying this property, were you worried about zoning? It sounds like you moved pretty quickly when you found the property. So were you worried at all about zoning before you acquired it?

Isaac French (39:13):

I had done some due diligence. I grew up in that area. So I’m familiar with the area and I had been looking for property for a few months. Before that, so I’d already looked into zoning. This property is just so perfect from every angle. It’s just outside of city limits like a quarter mile outside of city limits, which means we’re 10 minutes to downtown Waco and Magnolia, which is the big tourist attraction in Waco and Baylor and all of that. So we’re in great proximity, but completely in the country we’re surrounded by nature on 360 degrees. And zoning is if you’re outside of city limits a breeze, except for the septic system was definitely the biggest hurdle.

Isaac French (39:52):

It’s a commercial system for all seven units, one system, and you have to do an aerobic and you have to have a certain number of acres. We were fairly inside that threshold for how many units we could… For doing seven units. And it was just a pain in the county. Actually, I heard after the fact that we were the last multi-unit system that they approved. So they basically shifted it. And I think this is a definitely broader in the sense of the state, but probably also nationally. Texas is just behind when it comes to zoning and regulation in a good way, I think and just more freedom loving as a state.

Isaac French (40:24):

There’s less bureaucracy to deal with, but also it is encroaching. And so I’m glad we… Timing was a big thing too and we were just lucky there that we got that one passed and got our system in. In the future, we could’ve still done it. We would’ve need a little bit more land and we would’ve had to put in a separate system for each unit, so it just would’ve been quite a bit more expensive.

Robert Leonard (40:43):

Did you get any responses from the banks that you showed them what you did and if you did, what were those responses?

Isaac French (40:49):

The one bank, I was nice to him because he actually… So out of the three, two actually did give me term sheets and one of them was much less favorable. So I was nice to him because he at least wanted to give me a term sheet and we have a great relationship. The other bank, the guy who actually denied me. And I understand bank’s work. They have a committee. They’re structured in such a way that they can never lose pretty much.

Isaac French (41:11):

So it’s not just this guy’s fault, but he had a very short response. He was just like, “Oh, great. Good for you.” Or something like that. The guy who actually… He was actually a retiring employee at the bank, but the guy who replaced him actually sent me an email after I was on local TV, early on to discuss the project.

Isaac French (41:28):

He had seen it there and was like just very warm and congratulatory. No hard feelings and honestly on the next project, I’d love to give them a shot. Again, the bank that I did go with, they’re great guys to work with, but they charge you. They kind of have this reputation. They have a large risk appetite. They’ll take on riskier projects, but they’re going to charge you for it. We paid 5.5 on the construction loan, which was not bad at all, but that was probably a slight premium to what we would’ve paid with the other banks, but we got the project done. So no complaining there.

Robert Leonard (41:58):

Were you able to use your family’s construction company to build the project?

Isaac French (42:02):

No, I did it myself. The construction company is in Idaho and I’m in Texas. I actually started my own development company at the beginning of 2021. And then I was the project manager. I was superintendent. I did everything, the estimator. On that project, I hired all the subs, but then I also… It’s just me. But then I don’t have any employees. It’s just independent contractors and subcontractors.

Isaac French (42:24):

I also built a spec house simultaneously in five months of that nine and a half months that was just a couple miles down the road. So I built a $750,000 spec house and sold it, made about 200,000 profit on that, which we were able to roll into Live Oak Lake. We needed it. It was a very, very busy year for me and I learned a lot. I had a blast.

Robert Leonard (42:43):

How did you find the land that you purchased with a little lake on it? What was your strategy to find that property?

Isaac French (42:50):

It’s funny story. It was actually looking at my friend owns property on the same road that I’m on, that my property is on. His was different. It was on a big limestone bluff with a Creek down at the bottom. I knew about that property a couple years back. I knew about his property and I had this idea of brewing for a couple years. So I was honestly picturing this development going on at his place, being able to sweet talk into selling me part of that. He was really dragging his feet and he actually ended up selling it just at the same time or just after I bought this to somebody else. And it really was best for them and best for me.

Isaac French (43:28):

It wouldn’t have been ideal because this bluff, would’ve definitely presented some liability issues for the Airbnbs. It just would’ve been a stress for that reason. This place was just like a half a mile down the road on the same road with this little pond. I had no idea the pond was even there. I had driven past its place a million times, never thought anything of it. And it was just perfect. It was 28,000 an acre, which is a lot for that area. Although, that’s constantly going up that number. I know that’s pretty average or below average in a lot of other places.

Isaac French (44:01):

For that area, it was a lot, but I was like, “This is just perfect for me.” But honestly how I found it, I mean, I was just browsing Zillow every day and one morning I opened the app and it had been listed a couple hours before and like I said, I was on it like that. I was down there within an hour and walked it with the listing agent and made a cash offer and was accepted. Yeah, I’d always be checking because if you’re serious, because others are going to pounce on them if you’re not.

Isaac French (44:25):

Before that though, I mean I put in my homework, I contacted off market a lot of people from the GIS in the area to see if they would sell after I scouted that on Google Maps, just trying to find places. But honestly, none of them had the potential that this place has and none of them were also willing to sell. It just worked out perfectly on this one.

Robert Leonard (44:44):

Do you have increased liability because of that little lake or pond that you have on the property?

Isaac French (44:49):

Yeah. I considered actually doing like a rental agreement just to help mitigate that, but I wanted to… Instead, I put it very specifically in the listing description which actually gives us a little bit of protection because it’s technically an agreement when they book their state that they’re agreeing to everything the listing states. But as a backup we have… Especially because we have such a high percentage now on direct bookings, we have our own general liability policy, which is really robust.

Isaac French (45:16):

That costs us about 12,000 a year for everything on the whole property. And that just covers us no matter what happens basically. But I mean, we’ve never had a problem or anything close to a problem. But in that eventuality, we want to be covered. So that’s why we got that. And then Airbnb has their own million dollar policy for hosts.

Robert Leonard (45:35):

There’s seven separate units all on this one property, correct?

Isaac French (45:40):

Yes, correct.

Robert Leonard (45:41):

And are the properties situated in a way that the other tenants will see each other? I know they’re not on top of each other, but are they close enough in proximity that they see each other and if they are, do they ever have problems and how do you handle that?

Isaac French (45:54):

We are very intentional about the way that we position them. There’s four cabins around the lake and then three, not on the lake, but adjacent on this little creek that flows in and then flows out of the lake. We put each one in a different angle, so you’re never looking directly into another cabin. If you see pictures as big glass fronts, so there’s a lot of glass. There’s also a lot of trees, which we were very conscious to retain when we were clearing it. When we bought it, we ended up taking a lot out that were junk, but we left a ton of nice trees, but then also we have roller shades for every single window in sight.

Isaac French (46:26):

So privacy is never an issue. And we tell our guests that because we get that question a lot. It’s a hard balance to strike, but I think it’s working really well because you want to lend to the village or Hamlet feel where you’ve got multiple units together. But like you’re saying, you don’t want to be on top of each other. So having the trees and some topography, some elevation differences in the property is very important for that. And then of course the roller shades are blinds are, I would recommend no matter what. Even just from like a blackout perspective, people want to be able to sleep in the morning sometimes like sleep in, they’re on vacation.

Isaac French (47:02):

I’m glad we invested. It was like 5,000 for all the roller shades, just roller shades on the project. But I’m glad we made that investment. It’s definitely worth it.

Robert Leonard (47:11):

Outside of just like a privacy perspective, do you have any issues with one tenant using the lake and the pond, and causing ruckus for the other people that are there, or maybe having like… 4th of July just passed. Anybody, having like a party outside the unit and that… Even if it’s not a massive disruption party, but just a little family get together or anything like that’s causing noise or any sort of disruption for the other tenants?

Isaac French (47:33):

We’ve never had an issue. We strictly banned fireworks. And actually fireworks were banned in the entire county and maybe state because it’s been such a drought this year, this fourth. We have this commons area where we encourage outdoor activities, kind of congregating from different guests. We used that for family reunions and the retreats and we’ve had weddings there as well, but we actually encourage people… And it’s been great. I mean, there’s a ton of just organic chatting and mingling together.

Isaac French (48:03):

So we’ve had a lot of people actually strike up friendships and conversations actually based around that commons area just coming together and shooting the breeze. But then yeah, they’re free to use the space around their cabins and there’s plenty of space around each cabin as well with trees to block. Each of them has a fire pit and like I said, it kind of lends to that village field that people really love. There’s string lights at each one, and there’s the reflections in the water. And you’re looking at across the pond that so and so over there and so and so over there, and you know who your neighbors are. It’s only been more synergistic actually the way that it works together so far.

Robert Leonard (48:39):

The last thing I want to talk about on the show is your approach to direct listings. We’ve had a couple of people here on the show to talk about Airbnbs, some love direct listings. Some are okay with them. They’re like, eh, I don’t think they really moved the needle. They help, but they’re not a big deal. And then other people are completely against them. I know you’re a big fan of direct listings. You’ve talked about that numerous times so far throughout the show. Talk to us a bit more about why you like direct listings so much and how you make them work for you.

Isaac French (49:07):

I knew they were going to be important when I was creating the property. I Knew they were going to be important from a business value perspective, but I wasn’t planning to… I wanted to start on Airbnb to gain reviews there because reviews are so important to Airbnb and everybody in my area. Some people have tried direct listings, but they’re always 5% or less direct booking. So I knew Airbnb was going to be the lion’s share, or at least I thought that initially.

Isaac French (49:34):

So I wanted to spend the first several months and just exclusively use Airbnb to establish ourselves with good reviews. But as some people know because of my tweets, we actually got suspended on Airbnb a couple weeks rather after listing completely inexplicably. And it was a shocking realization that morning I woke up and people were sending me messages through the website like, “Your link is down? What’s going on?” I mean, I was like pulling my hair out because I realized it just hit me with this very personal feeling like we’re completely dependent on this platform.

Isaac French (50:06):

Especially in a day and age… And I know this wasn’t political or anything else like that, but we’re living in what some people call a cancel culture. And that’s kind of how I felt from a business perspective, like, “Okay, I’m totally canceled. What am I supposed to do?” I immediately got on the phone with different friends I had made on Instagram. I mean, we were just barely had a couple thousand followers maybe at that point and started working some different things out with some influencers.

Isaac French (50:28):

This one lady, super helpful recommended me to a blogging account in Dallas that did these giveaways and she said, “You should give them a call. Maybe they’ll do a giveaway on you if you pay them.” So I called them up and paid them $950 to run a giveaway on my property. And it was still very new, unheard of in the state. They were really eager to do it when they saw what we had. They ran this giveaway that day and I got 5,000 Instagram followers, probably about $40,000 of direct bookings from that one, and 50,000 website views from that one giveaway.

Isaac French (51:03):

So I was like, “Oh my goodness, this is the jackpot.” This is that marketing secret sauce I’ve been looking for. I was like, “I’m willing to make the investment. I’ll pay influencers whatever they want. I’ll give them their stays. I’ll give the stays to the winners, whatever to get this kind of traction.” That was our best one. It was our first one. I think a lot of it was just that people didn’t know about us. But we’ve seen huge success from those. I probably spent $8,000 and have given away maybe upwards of 40 nights now for free. But we’ve grown our account organically to 42,000. And overall we’ve gained about $200,000 just that I would estimate just from that exposure on social media of direct bookings.

Isaac French (51:43):

So from a profit perspective that’s $35,000 of profit just from that little investment that I made. Direct bookings are good for several reasons. There are pros and cons. The pros far outweigh the cons in my opinion and here’s why. The pros are you make 10 to 15% more while still passing 5% savings to the guest. Huge pro there. You don’t have a data wall with the guest. You have their contact information, which Airbnb or VRBO do not give you. You have their email.

Isaac French (52:15):

You can’t be de platformed in a scenario like that. I’m actually super glad that, that happened early on because it was a perfect time for that to happen, to really jumpstart my direct booking growth. The cons that people give are you have to deal with bad guest sometimes. They’re not screened for you. If there’s damage, what’s your recourse? So we have a $400 security hold, basically. We communicate this upfront in the listing and then the messaging that goes on their payment method when they book and is released seven days after they check out, or after they check in rather.

Isaac French (52:49):

If there’s ever an issue with, which we’ve never had one, that we’ve had to charge any of the $400 for, but if there ever is an issue with damage, we’ve got at least that much and we still have their credit card info. If worse comes to worse, I mean, we’ll figure out a way. And as far as like a communications or just dealing with the guest, to be totally honest, with all respect, Airbnb is pretty awful, honestly, at customer service.

Isaac French (53:15):

I mean, I’ve had a few good exceptions and I hate to be that blunt, but they’ve obviously served a purpose for us. I think the company just is huge though. And their customer service is they’ve also leaned whereas when they first started, they were very much attentive to hosts and what the host needed because they realized that was who they were relying on for their growth. The hosts and the guests, but the ratio is much more towards hosts. And now they’ve really, I think overcorrected.

Isaac French (53:39):

And I would say 70% or more is just… Some people say a lot more of their attention and value and appreciation is towards the guests. And I get it. They’re trying to retain people. They’re in a more competitive environment now, but it doesn’t bode well for hosts, especially those that have established a good reputation. I mean, I have an awesome reputation on Airbnb. I have strictly five stars that most of the properties. Very, very good ratings on all of the properties, well above average and have never had an issue, but it’s always just a pain dealing with them.

Isaac French (54:13):

So to answer that question, I’d much rather deal with a guest just myself and not have to deal with this intermediary that is at best unpredictable. So I know I’m not being super charitable to Airbnb, but that’s my blunt take on it.

Robert Leonard (54:27):

And there’s always that massive risk of building your business on somebody else’s platform. And is not just Airbnb. This happens-

Isaac French (54:32):

Exactly.

Robert Leonard (54:33):

This happens everywhere. People talk about it on Amazon if you’re an Amazon seller. I’ve had friends who have hundreds of thousands of subscribers on YouTube and their YouTube channel just goes away overnight. Literally, they don’t have any idea what happened and their whole business is gone. It happens with social media, eCommerce brands, anything that builds brands on social media and they are entirely reliant on those platforms and they don’t build an email list, and then their platform or their accounts get suspended and that’s completely gone.

Robert Leonard (54:57):

I think your approach to direct listings is really valuable there. And that’s probably the approach that I would go as well if I were to build an Airbnb business. But, Isaac, as we wrap up the show, I want to give you a chance to tell everyone, listening, where they can go to connect with you, learn more about what you’re doing, what you’re building, maybe check out your property, et cetera. What’s the best way to connect with you on the internet?

Isaac French (55:18):

Our website for the property is liveoaklake.com and our Instagram handle is stay at live oak lake. And then me personally, I’m on Instagram and Twitter most actively @isaacfrench_. I’m trying to drop a lot of valuable information on Twitter. Being super transparent. I just actually released my year to date profit and loss for people to see. So I’m just trying to be super transparent with what I’ve learned there and I pay that forward. And then I also just launched a YouTube channel. I haven’t posted my first video, but I’m gaining subscribers there. And I have an email list. You can sign up for all that at isaacjfrench.com.

Robert Leonard (55:55):

Awesome. I will be sure to put a link to all your resources in the show notes below for anybody that’s interested in checking them out. Isaac, thanks so much for taking time out of your day to join me. I really appreciate it.

Isaac French (56:05):

Thanks for having me, Robert. I really enjoyed it.

Robert Leonard (56:07):

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 (56:13):

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.