#17 Short Term Rental Legends with Eric Moeller
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Itunes – www.TonyJavier.com/itunes
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Guest Bio: Eric D. Moeller is the founder and host of the Airbnb Mastery Summit where he personally interviews top experts in Airbnb, short-term rentals, and real estate from all around the world. Founder of Short-term Rental Profit Academy and the STR Legends Mastermind.
Born and raised to a blue-collar family in New Jersey, Eric got his first taste of real estate investing at the early age of seventeen when he was mentored by a local investor. She taught him the ins and outs of real estate investing and by the age of nineteen Eric had purchased his first property.
More about him – https://tonyjavier.com/ericmoeller
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Show Transcription:
Tony (00:00):
Welcome to today’s episode. We have Eric Mueller with short-term rental legends, the short-term rental King on the line here. What’s going on, Eric? Good to see you, man.
Erick (00:14):
Dude. Good seeing you, man. Thanks for having me.
Tony (00:16):
Yeah. So Eric is, I’ve known Eric for several years now. He’s actually one of the first people I connected with in San Diego probably must have been five years ago or so when I moved become friends since and business associates seen him grow his business, which has been awesome. So tell us about the short term game. So you’re one of the main experts in the field right now. You’ve got your Facebook group, you’ve got your mastermind, you’ve got a lot of great things going. A lot of people go to you and respect you for short-term rentals. That’s one of the big things that have come up in the last, 5 to 10 years since Airbnb kind of made that space big. So, guess tell us a little bit about your short-term game, the benefits of it and kind of what you’re doing with short-term rental legends.
Erick (01:03):
It’s been a journey. Yeah. I think we met when I had first moved out San Diego as well. So we were kind of like both relocating to that area. And my background is kind of is in real estate investing, you know, as you know, just like the whole flip business, the development business, the old traditional property, you know, investing in rental business got burnt out with that whole model,as I think many or most investors do at certain levels. And,most of the shirt I’ve found the model of short-term rentals. I want her to get into a business that I could run kind of not be located, tied into a certain location. Right. My old business was in New Jersey and I was kind of burnt out with Jersey and wanted to go to San Diego live on the beach, that old dream. And I found the short-term rental model. Right. And I first started doing the renting apartments and houses and then renting them back out on Airbnb and making a spread on that. I grew that to a handful of different properties. Then we got into the management business where we’re like, okay, well, instead of us leasing it, let’s partner with investors and we will manage the Airbnb side, the short-term rental side and just charge a percentage profits grew that as a business as well and all throughout Southern California, different other markets around the country and that was a lot of fun. We did a lot of properties, did upwards of a hundred properties that way and cashflow was great. But as we were growing that business, we were also sharing this, our techniques through the internet and sharing it with the world of what we were doing, what we were figuring out.
Erick (02:52):
And before we knew it our educational business just started growing around the world and there was only a handful of people that really focused on internet marketing and really sharing what they were doing and offering these techniques as a either coaching or whatever that was. So we grew that pretty quick. And last year I decided to exit out of the property side and go all in on the educational business, which was actually a blessing with what happened with the COVID situation. So what we’ve pivoted a few times, but essentially what we focus on now is we have a company called short-term rental legends, and it’s a high level mastermind and we focus on companies around the world that operate short-term rentals at scale. So to enter into our mastermind, you have to be doing about $2 million a year or more in top line revenue or a minimum of 30 short-term rental units.
Erick (03:52):
Most people that are in our group are running about a hundred to 300 units roughly. But we really traditional mastermind with folks on a very high level and really kind of focusing on how do we become better operators, better create better hospitality experiences and really drive this industry forward and then through that as well, we have other educational products and masterminds and all kinds of offerings within there. So that’s what we’re focused on now. And as I was just mentioning before the podcast, we we’re pivoting back into the real estate side. But we’re getting away from leases and we’re focusing on management and ownership and really kind of focusing on a brand, a specialized brands around that model. So I’ll leave it up to you with the questions on where to go with that one, but Yeah. We’re doing quite a bit right now in the industry.
Tony (04:46):
Good stuff, man. So a lot of people that are listening to this either have maybe a few unitsmaybe they own 30 more units and it can be a part of short-term rental legends, but for those that are either at small scale or want to start their own short-term business, usually people start with their house, right. You know, they rent a bedroom or they move out and they, you know, lease their property on short-term rental sites. So for someone getting started, what would be the top things you would say, or pieces of advice that you would give those just starting out?
Erick (05:20):
Yeah, I think so let me clear on this. We focus more on the entrepreneur versus the mom and pop host, right? So we don’t necessarily focus on the individuals that want to rent out an extra bedroom, or if they go on vacation how to rent out their house and the reason for that is I I’m just, I mean, you know, me throughout the years, I, like to focus on scale, like focus on business brands, all of that. So those are the people I usually talk to and they’re typically either entrepreneurs or real estate investors really understanding like, Hey, short-term rentals is a really powerful niche. It’s not going anywhere. And it’s going to be a new Avenue for real estate to grow, you know, real estate income. So if we’re talking to those individuals, I think the very first thing there is like, you have to understand that this short-term rentals at the end of the day is a hospitality business, right.
Erick (06:20):
It’s very difficult to, get a property, you put it up on Airbnb and just set it and forget it and make money. A lot of people out there sell courses and YouTube videos and all this stuff about how this is a fully automated business and it is not, it’s a hospitality business you know, at the heart of it. So before you even decide to enter into it, you’ve got to decide what excites you the most about this model? And for me, I, what excites me the most about this model is the ability to create a unique hospitality experience for a traveler coming to the area. Right. And I get to leverage that by investing in running unique properties. Right. So I think the very first thing is like understanding is a hospitality business. And you have to understand at what level do you want to play in that industry, right? So it’s not just getting a property for putting furniture in it, put it on Airbnb. And now you’re, you’re two, three X in your rent. Long-Term rents, right? It’s, there’s a lot that comes along with it that justifies that to x-rent on that.
Tony (07:28):
So whether you have one unit or a hundred units, you need to treat it like a business, like you’ve got to woo the customers, you’ve got to make sure you’ve got good customer service. You know, there’s no kinks, you think of, you know, the, the small details to make their stay comfortable. And like you would a hotel. Right. And so what gets someone from owning 1 unit to 30, or not even owning, but I guess some of them may be managed, but getting them from 1 unit to 30 to a 100, to 300, like how do they scale? Especially since short-term rentals really, haven’t been a huge thing until what the last, you know, 5 to 10 years or so.
Erick (08:01):
Yeah. systems, it’s all about systems and it’s, you know, like there’s 3 main ways of scaling this type of business in the short-term rental space. It’s leverage, which is management or leasing somebody else’s property and then running it as a short-term rental or two is owning the property and then running it as a short term rental. But to get from one to we found that there’s these different stages. You have the, the mom and pop hosts that are running one to 10 properties, that that’s a certain stage. And then from 10 to 25 is a whole nother whole nother level to answer into. And then 25 to 50 and then 50 to a 100 and beyond are these different stages. And what we found, especially with the STR legends and our group is they focused on deciding once they decided like, Hey, this is the hospitality industry that I really want to get involved with.
Erick (09:00):
They narrowed it down, like any other real estate investor or business, they figured out what was working. They figured out what property they wanted to go after they figured out what guests they wanted to serve. They’ve made 1 to 2 or 10 properties successful. And then they just duplicated that through systems and technology, right? This is one business. This is one business within the real estate industry that is very scalable with little funding lean teams and a ton of technology. Right. And I can break that down with that, what that actually means. But we found, again, people figuring out the asset, they want to go out there, the guests that they wanted to serve. And then once they made that successful on one or two properties, they duplicated that through their systems and technology, and then leveraged virtual assistants to scale it.
Tony (09:58):
Now, did you say, did you say, maybe I’m saying low overhead, is that what you said over it?
Erick (10:04):
What I, meant by that is for us and, you know, like the, our old business model of flipping and all that stuff at scale, you need a lot of money. You need a lot of investors. You need a big team, you need a lot of management, right? It’s a very people, heavy business. Somebody in my mastermind, for example, she they own two boats. EcoTails in California and they’ve run over 150 short-term rentals on Airbnb
Tony (10:35):
In San Diego altogether
Erick (10:38):
Los Angeles, Los Angeles. Yeah. So they’re all in one area. It’s a specific, they only focus on one and two bedroom apartments. They only focus on working with real estate investors to where they can take over an entire apartment building or, you know, fourplex eightplex, whatever that is. They have a specific asset and they only focus on business travelers and now extended stay because of COVID, they literally have one, onthe boots contractor or maintenance guy, inLos Angeles that deals with the entire property, all their properties. It’s the two of them, plus 10 virtual assistants in the Philippines that runs their entire portfolio. Right. And that’s what I mean by low overhead. Right. It’s like, you’re able to, they were able to leverage that and leverage technology and leverage virtual assistants to scale that model.
Tony (11:34):
Now, of course, 10 virtual assistants, that sounds like a lot to manage, but if they have like good systems and processes and procedures and software to help manage that, hopefully they shouldn’t have to oversee them every single day and look over their shoulder. Right. So that’s kind of what you’re saying is that you can leverage a hundred and a hundred units with 10 people. That’s, you know, I guess that’s, that’s pretty good. You know, that’s not, that’s not a lot of people, as long as you don’t have to, you know, manage them every single day. Right?
Erick (12:03):
No. So, you know, the approach is, you know, you hire the manager, who’s going to the virtual assistant manager, who’s going to manage the rest of the virtual assistants. Right. So they manage one, they manage two people, they manage the maintenance person and they manage their VA manager who’s following their systems. So, yeah. So my whole point of bringing this up, man, is like to answer your question. It’s like how somebody can go from 1 to 30 or from 30 to a 100, it all breaks down to understanding the asset that works for them in their marketplace. That the guest avatar that they’re servicing is, you know, you have a different, there’s different needs to service Airbnb’s for families, right? Like you and your family versus a business traveler or single person coming to the city for whatever reason.
Tony (12:58):
So you kind of need to niche it down. I know you love that term, niche it down. Right. So, yeah. But what if you’re in like San Diego and you have all kinds of different travelers, you have business, you have pleasure. You have people visiting that are family. You have graduations, you have sporting events. I mean, there’s so many different things. Are you saying you can’t cater to all,
Erick (13:18):
It’s very difficult to, to be great in this business. If you’re catering to everybody that’s any business, that’s any business. Right. It’s like, you know, we, again, someone coming to San Diego with that, with the family, they’re focused, they have different needs and they’re interested in different properties and they need a different type of customer service than someone who’s coming to San Diego to go to a conference or to do whatever you can do in COVID era at times. Right. you know?
Tony (13:56):
Yeah. Yeah. Gotcha. So are there, are there certain markets that are better than others? Like San Diego is a high price market? So the rents and the prices are pretty high I’m from Wichita, Kansas, Kansas city is not too far away. I hear Kansas city is a pretty good market. Have you seen like certain markets or certain price points that are better for short term rentals?
Erick (14:17):
Yeah. So right now the whole industry has been flipped upside down because of COVID. Right. So what we’re seeing, and this is most parts around the US and Canada. But we’re also noticing this because in the STR legends mastermind, we have company, we have the biggest companies from Iceland and Australia, Japan, Europe, all over the place. And we’re starting to see that this is happening in pretty much every country around the world that has high tourism or short-term rentals is popular. Secondary drive in markets are on fire right now. So urban markets, LA New York city, San Francisco, Oregon, downtown San Diego, these markets are struggling to keep their business, their short-term rental business going right. You have a lot of saturation in there with a lot of hosts and a lot of investors and VC backed companies that, that have leased up hundreds and hundreds of units per city.
Erick (15:20):
So they’re just dropping their daily rate down to pennies just to get people in. They’re just focused on occupancy, right? Less people want to be in cities right now. Right. There’s a lot of factors behind that, you know, that driving that, but the less people want to be in cities. They want to be surrounded by less human beings. They want to be surrounded by less concrete and the city jungle. Right. They want to be in nature. Humans want to be in nature right now. So those drive in markets that are mountain towns, that’s surrounded by nature, right? Mountains, towns, Lake towns, all of that outside major cities within a few hours drive are doing really, really well. Literally operating at,
Tony (16:06):
Is that going to, is that going to be forever or is that more mainly because of COVID and then as that kind of like dies off, then people will go back to the cities.
Erick (16:16):
That I’ve determined. Yeah. I think that’s to be determined, I have an opinion on it. I think it’s just my opinion. I think we’re going to see less people moving forward in major cities. I see those secondary markets really expanding. I think people want more land and want more space and want to be surrounded by people they love and trust versus a city full of strangers in a way. Right. So we’re seeing it in San Diego. Most people I know in San Diego have left. Umost people I know in LA and San Francisco and New York and New Jersey all have left those States and cities to go to areas where they can get more lands,ulike Texas and Colorado areas like that. And including myself, we’re moving to Texas soon. So yeah. We’re going to add air van, right.
Tony (17:10):
Is it because of taxes or because of what you said, you just want to spread out and you know, cause my wife and I had talked about that before. It’s like, man, for what we pay for like a starter house here, we get a mansion and like, you know, Kansas, right?
Erick (17:24):
Yeah. Yeah. It’s ridiculous here, man. Yeah. prices are insane. Cost of living is insane. Like the local and state government here are just getting, I just, it doesn’t make sense. The amount of taxes and regulations and between myself and my girlfriend, we have four companies, right. And we want to build a team. We want to create jobs. We want to have an office. We want to, you know, want to have a family eventually to do that in California, you got to play at such a different level. That it just, why would you do that when we have the option and the choice to go to a state that supports entrepreneurship and those jobs and all of that. So, yeah, there’s many reasons why we’re doing it. San Diego is potentially running, shutting down short-term rentals so it’s, you know, we want to go to a place that actually supports entrepreneurship, supports our business models. And it seems like Texas is very hot for that right now.
Tony (18:23):
Well, that’s a good point. You said. Because I, thought LA had shut down short-term rentals, maybe I’m wrong. San Diego. They did. Okay. So San Diego has tried to and it, at some point they may. So what about like Texas, like places in Texas? Is that a, is that a thing as well? Or are they pretty open with,hort-term rentals able to do that?
Erick (18:44):
Yeah. So for most places in the United States short-term rentals is, regulated on a local basis, right? So you have some States like Florida, Texas, and Arizona that say, Hey, it’s illegal for a local city to create any type of bands or restrictions around short-term rentals because the owners are can make, essentially can treat their properties the way that they want to treat their pot properties. Right. you know, aside from opening up a car, you know, a car shop in the middle of a suburban area, right? If you want to rent to your property for a year, 30 days or a day, you’re allowed to do that as an owner. So there’s a few States that have done that with that said there there’s a lot of local, like Austin, Texas had, they’re constantly going back and forth with new laws, restricting short-term rentals, fighting with the state, all this stuff. So every single day, something new with short-term rentals and that’s why I think secondary markets are great markets to really invest in long-term for this model versus the urban markets where up until COVID was the markets to be in for Airbnb and short-term rentals.
Tony (20:03):
So would you consider, like, I don’t know if you know much about Kansas city, would you consider that a secondary market? Cause it’s not huge. It’s not cluttered it’s you know, it’s a pretty decent sized town, but it’s not like a San Diego or LA where it’s just like super jammed, Right?
Erick (20:16):
Yeah. And that’s a bit more like a bit more urban there too. Right. As far as like the landscape versus like a Lake Tahoe, which is all vacation rentals. Right. so yeah, Kansas, city’s an incredible market for it. I have some we have a couple of legends there that are running 50 and a hundred properties but there are some restrictions that are coming in over there as well. So yeah. Let me
Tony (20:41):
Say about that. What do you, what do you do to protect yourself? Like obviously for leasing, you probably want to create as many outlets possible in your, in your master lease. But I mean, what else are people doing to protect themselves that have hundreds of properties, especially in an area that could have restrictions.
Erick (20:58):
Yeah. And to clarify on all this, right? It’s like if you’re in the mindset of scaling a short-term rental business to hundreds of unitswhich is completely possible still in this market you want to obviously diversify as much as possible if you’re going to lease, which I don’t recommend leasing. I think it’s a bad model. I’ve been preaching that for over a year.
Tony (21:24):
So those guys that are doing those guys that are doing scale, a lot of those guys own those properties.
Erick (21:29):
So they’re switching, right? So COVID forced them to switch the model. They went from leasing, all the properties to them, what we call rev, share where we switched the leases to a property management type of contracts with the owner. So the owner is taking the risk with us. But at the end of the day, we share profits, the owner will make more money. We take a portion of our revenue and that’s a very scalable model because you’re not all focused on debt where leasing it’s all debt. And the only way that you make money in leasing is when the market is going up and it’s highly risky, you know, it’s very risky. But now the new model where I see a lot of these operators, including myself, really focusing on is how do we control more properties with the right to run as short-term rentals? How do we buy more boutique hotels? How do we buy more small apartment buildings that we can get the right, the permits to run as a short-term rental or how do we buy single family homes and traditional vacation rental markets that,llow short-term rentals for, you know, all year round as part of their culture.
Tony (22:40):
So someone that’s really wanting to make this a business, obviously, if they own a property that’s pretty easy, you can probably own a property and do you know, short-term rental, but if someone wants to do multiple properties, you’re saying leasing is not a great idea. Rev share model is probably the most scalable. And then what’d you say, ownership after that? So basically rev share model is kind of what you’re pushing with with your people and probably what you’re going to try and do in your new business.
Tony (23:08):
Yeah. And I’ll answer that. Like it worked backwards on that. The only reason why we’re going into the management model, the rev share model is to enter into new markets. We’ve never been in before, like park city, Utah Lake Tahoe in Nevada on the Nevada side at California side, Austin, right. And Austin areas is we want to expand into those areas and get to know the markets and to do that, we can use the rev share model to generate Cash flow very quickly and very easily while we’re studying the market to buy properties. Right. And the whole objective is to use everything that we’re doing here is to buy and control real estate. Right? If you have the ability to buy real estate and you’re patient, and you have the ability to be patient go right to the ownership model, right. And you can leverage real estate buying real estate and running it as a short-term rental in so many different ways. But if you’re somebody who needs to get cash or wants to develop this model to generate cashflow, the rev share model, or the management model is one of the best ways to do that. And if you have the right systems, the right, you know, the right processes and you understand your, what you’re going after, you can scale it very quickly with very little overhead and with very little investment into that model.
Tony (24:36):
What would you say? I guess, one of the best ways for somebody to get into it is obviously owning their own property, which most people, if they own a property, it’s like one and, you know, potentially a rental, like for someone like me that owns like over a hundred rental properties, if I wanted to take those properties and, or start taking those properties and turn them into short-term rentals how difficult do you think that is? I mean, obviously you have to furnish them, you’ve got, you know, more requests, you’ve got more people that are occupying the property. Have you had anybody that, you know, that has done that and kind of what the experience is?
Erick (25:10):
100 percent An investor he’s a legend in our group,an investor Richard at a San Antonio, Texas. He has over 150 properties as well really smart guy. And he was kind of in the same model as us buying distressed properties, renovating them and either flipping or renting them out. Long-term right. Austin started blowing up over the last few years and it’s only is just down the road from there. So he started switching over his long-term rentals,uand his new investments into short-term rentals. Right and there’s two things to know there. One is aside from understanding the asset and is it needed in your marketplace? Will people actually rent it? And can, can it be more profitable than a short-term rental? That’s, one thing to understand, but the two main things to understand is one is you’re gonna invest more money into these properties because you have to go a bit higher end.
Erick (26:10):
You have to invest in furniture, linens, cleaning that whole thing. It’s gotta be high-end right. When I say high end, it’s gotta be world-class accommodations. So you’re investing more into these properties. But then two is the moment that you decide to do that you have now created a second business for yourself, which is the short-term rental management business, because now you’re dealing with marketing and advertising and customer service and repairs and all this other stuff. And if you’re going to do that in house, you have to know those are two separate businesses. So keep that in mind, if like, for yourself, if you say, Hey, Eric, I want to convert 25% of my portfolio. You have to ask yourself, are you managing everything on the Airbnb short-term rental side in house? Or can it, can it still be profitable for you by outsourcing that to the correct local property management company, n your area short-term rental property management company,
Tony (27:11):
You take all 150 and turn them into short-term rentals, or just some of them,
Erick (27:16):
Some of them, I think he’s like 50, 50 right now, because some properties won’t do well as a short-term rental, right. Location could be, the style of home could be the neighbors. It could be whatever that is to where it’s like, Hey, I got this awesome tenant. I’m cash flowing on this property. They’re never leaving. Why would I change it? And now he’s buying properties and renovating them. And instead of flipping them, he’s running them as short-term rentals putting long-term financing on it and yeah. To exiting his rent on some of these properties. So yeah, I would say he’s 50, 50 right now on that model.
Tony (27:51):
Gotcha. Cool. So we’ll start wrapping it up here. So I appreciate you sharing there’s some people that probably want to get into short-term rentals, so either you’ve talked them into it or out of it you know, it’s one of those things that, you know, people think it’s probably really sexy, but it is work and you do need to treat it like a business. Uis there anything else you can share with our audience that I guess could help them if they decide to,take the leap into short-term rentals?
Erick (28:19):
Yeah. With all that. And, you know, I, like to talk blunt about this because there’s there’s a lot of, you know, experts out there in this space saying that it’s a set it and forget it type of business. And it’s not at all. You know, it’s like any other business, it takes work and dedication and all of that. But man, I love this freaking industry. It’s, you know, it’s brought me all around the world. It’s, I’ve met some incredible people. I have the ability, my business, that we’re the new brand that we’re going to be launching next year. I’m literally developing a company to own and manage properties in the areas that I want to travel to and spend time in the most park city, San Diego, you know, arcelona, Spain, like we’re going to be running properties there and I’m going to be spending time in these properties, running my business. Right. So even though it’s a difficult, it could be difficult at times to scale this business. It’s an incredible company or incredible industry. It’s not going anywhere and if you’re dedicated to it and it excites you, it’s a great model to either scale or is a great model to be able to leverage, tacquire new properties in different areas. Right. So, tat’s more of a motivational thing of just knowing that, Hey, COVID, hit us pretty hard, but we’re doing really, really well right now, if, better than where we were before we started. And I don’t think the industry is going anywhere. So, an then for anybody who wants to start, I mean, they could just check out. We have, a ton of free resources from Facebook groups to blogs, to podcasts, all that stuff that we kind of just let the dams open of a content. So they can always go to strprofitacademy.com and check out all that stuff out.
Tony (30:07):
Oh man. Yeah. We’ll put some more links down below for you guys to check it out. Cause obviously there’ll be people wanting to start investing in short-term rentals would be some that maybe want to check out STR legends, that own lots of properties so we’ll, we’ll make sure we include those. So congrats on your success man. Like I said, five, five years ago, I know you moved to San Diego, got out of the single family flipping business and we’re kind of trying to figure out what you’re wanting to do. So it’s awesome seeing you grow, man, and just like anything, I know you had to jump into some things that maybe worked or didn’t work and then finally found, you know, your niche and what you’re dealing, man. And you’re really motivating the industry and getting people to create businesses around this, which is phenomenal, man. So congrats on your success and appreciate you coming on and look forward to catching up with you again.
Eric (30:50):
Of course, man. Thank you, brother. Appreciate your time, man.
Tony (30:53):
Talk soon. Right? See ya.
