2 Wealth Show S2 Ep4 – Where the Short Term Rental + Note Industry is Headed
Super E and Justin Bogard talk about the future of short term rental spaces and the note industry.
Key Takeaways:
Resources and links discussed
Sponsored By: Integrated Health Solutions
We are passionate about your health and wellness and we know you want to enjoy a vibrant, pain-free, active lifestyle, but when you are in pain this seems almost impossible.
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To learn more visit us at
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About the Hosts
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Super E – Real Estate Investor specializing in short-term rentals and the management of them. She connects investors with short-term tenants and manages everything in-between.
Connect with the Hosts:
2 Wealth Show S2 Ep4 – Where the Short Term Rental + Note Industry is Headed
Super E and Justin Bogard talk about the future of short term rental spaces and the note industry.
Key Takeaways:
Resources and links discussed
Sponsored By: Integrated Health Solutions
We are passionate about your health and wellness and we know you want to enjoy a vibrant, pain-free, active lifestyle, but when you are in pain this seems almost impossible.
In order to be pain-free, move fluidly, and enjoy an optimal level of functionality, you need a personalized yet integrated, research based and clinically proven approach and that’s what we do.
To learn more visit us at
ihsindy.com
cryotherapyindy.com
About the Hosts
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Super E – Real Estate Investor specializing in short-term rentals and the management of them. She connects investors with short-term tenants and manages everything in-between.
Connect with the Hosts:
Welcome to the two wealth show, a show that shares how you can create real wealth for you and your family. I'm one of your hosts, Justin Bogard and my cohost is Elizabeth Sickles, AKA super E. I am a real estate note investor specializing in performing residential real estate debt. I find the deals quire them for my own portfolio as well as educate investors while walking them through the process of owning a real estate note, my cohost Super E, a real estate investor specializing in short term rentals and the management of them. She connects investors with short term tenants and manages everything in between. Our show was sponsored by BrightPath notes and Elizabeth Maora. You can find out more information by visiting our websites at brightpathnotes.com and Elizabeth Maora.com
Elizabeth Maora:so welcome to the two well show where we teach you all about how to invest for you and for your families. I'm Elizabeth Sickles
Justin Bogard:and I'm Justin Bogard And today we're going to be focused on talking about what's going on today and today's market with real estate and our specific niche businesses and what we're going to look forward to getting into and what the outlook is going to be like. You know, in our, our safe projections, you know, in 2020
Elizabeth Maora:exactly. So the show is sponsored by bright path notes and by Elizabeth Maora.
Justin Bogard:Yup. And you can find us on our websites BrightPath notes.com and Elizabeth Maora.com. So Super E, we had, um, a good episode again. And then number three, this is number four, episode number four. And we talked a lot about, uh, our 2019 accolades and what we look like for 2020 what we want to do. And so that kinda is a good segway into exactly like where, what's going on right now, what's going on in, in these businesses and what does it look like for the future? And so why don't you kind of start off and just tell me, where is the short term rental game at today for EEM and, and where is it at in general for everybody?
Elizabeth Maora:Sure. So overall for this industry, we're at$160 billion. That's it. That's it. Globally, we had some big announcements last year with Marriott entering into the short term rental space. So they now have 5,000 properties that you can book through Marriott that are properties that are homes and villas. And that's actually what it's called. Um, so the fact that they're in our space is a really, um, it's kind of a double edged sword because they are members of the hotel lobby association, which is extremely powerful. So it's interesting because they lobby against us, but now they're in our space. And in some cities they're still lobbying against short term rentals. So we have a lot of dynamics going on. We have a lot of, uh, private money, a lot of institutional money also in the industry. So we have a company over on the West coast called Bokassa. They've had over half a billion dollar, um, raised in money or excuse me, in funding 500,$25 million. That's a lot of money. It's a lot of money. Their last raise was 300 million,$319 million. So they manage over 20,000 properties actually all around the world. And what they've done is they're still privately owned but they will buy up smaller mom and pop property management companies and that's how they've grown so quickly. I actually got a letter from them last year. I did, yes. Um, so they have, they have a really interesting business model. So a lot of money. We have a lot of software that has entered the game. So technology is huge in the software or excuse me, in the short term rental market, everything from the four digit codes to get into a property to virtual concierge service. We use those in our properties where you can talk to Alexa to ask Alexa all kinds of information. Um,
Justin Bogard:I saw that on one of your social media posts. That was so cool cause you're just like or, or you had a card? I think a display, like tell Alexa this information and all of a sudden, you know, it's like opens up a new world. Are you scared that Alexa or Amazon listening in on people and your short term properties,
Elizabeth Maora:you can now tell them to not to, um, you can say a certain phrase so that they will not listen to what's going on. What does that phrase? I can't remember right now, but it was actually, yeah, so we just finished CES, the consumer electronic show and that was one of the big things was actually privacy. And there's a lot of court cases going on right now too regarding privacy. So, um, it's gonna be interesting to see what happens. But, but in the vacation rental space too, I'm just on the software side. One of the companies we used to use beyond pricing, they do, um, they use algorithms to change your nightly pricing depending on a lot of different variables. They just had a raise. Their last funding round was over$40 million. Oh wow. I was at a conference last month in New York city and the second person I met there at breakfast was a VP at Goldman Sachs. Yes. Because they want to know how to play in the vacation rental industry. Yeah. They're missing out. They are missing out huge time. Yeah. So it's huge, you know, institutional money as well as a lot of, a lot of smaller money as well. So we're, we've really seen the growth in this market. Um, Airbnb has, is going to be going IPO this year. That's one of the most anticipated IPOs. Um, so it's going to be exciting to see what ends up happening with that. Um, pre, pre IPO, the shares are selling at$175 per share, which is very high, um, right out of the gate. So yes,
Justin Bogard:and I'm not a stockbroker means, but that's the[inaudible]
Elizabeth Maora:it's penny. Please. That would be great. Yeah, they would all be sold. Um, so it's a really, it's an exciting time to be in the vacation rental industry for sure. You know, lots of big numbers, lots of big things going on. Um, we have a lot of people that are switching over to renting vacation rentals, short term rentals. Um, we have, you know, just some challenges within the industry itself. There's actually talk about what do we call them because now we have urban rentals as well. Okay. So what, you know, really, what are we doing? Um, so you know, some really, really, um, big topics, big things going on. And then if, if we kind of drill down, one of the other things that's going on in our industry at least, um, and I'm interested to hear from the note perspective is on regulations. So for us here in Indianapolis, our team, we really want to be ahead of any regulations. So we do a lot of safety stuff. Um, in our properties. There's actually a lawsuit going on right now in, um, one of the States, um, towards the West where four people, um, died in a fire. Um, because there, I think it, don't quote me on this, but I think I'm thinking that there wasn't a fire extinguisher in the property or it wasn't where it was supposed to be, which is just so you know, it's supposed to be fire extinguishers are supposed to be hung on the wall. Yeah. So, um, yeah, so it's going to be, we're really, we're keeping an eye on all of that stuff and we just want people to obviously to run safe and effective, um, rentals. But that's really, regulations are going to be a huge part of where this industry is going and where it's been and where it's going.
Justin Bogard:Yeah, they can be good and they can also be a be a stopping point for you as well. Right? Absolutely. Yeah. So the note business has had its ongoing battles since Dodd-Frank, Oh, January 10th of 2014 or whatever the exact date was. And it put kind of the kabash on banking, uh, part of the business to where the underwriting process and how they originate loans is a lot more stringent and it's less forgiving and it's very, you know, in, in the bottle, so to speak to where it's like if they don't fit it, you don't know what to do with you. So a lot of people can't get homes because they can't get any help from lending, which is where seller financing comes into place because us as private investors, we can have those homes that are, that are ours that we sell for investments. We can also carry back the note on that which makes us the bank. And so Dodd-Frank and the CFPB rules basically say that us as investors can only do three of those a year. Oh really? With the preface that you have to do third party underwriting and you have to have everything done in this, this type of way. Okay. Cause you're considered a business at that point. So before Dodd frankly was unlimited. You could write as many loans as you want as an individual, as an LLC, as multiple LLCs that are a group of, or a family of companies. And now you can only do three. And so what we've discovered is that we have a couple of vendors that are underwriters that can actually underwrite in every state and they're, they're qualified. It's all legal. And so we can get around this, this issue cost a little bit of money, but it's actually ends up being the right thing to do for the borrower and for you as the investor because then you get a qualified borrower that has a high score, so to speak, in the ability to repay, which is most important because credit score, you know, a lot of people worry about, well what's their credit score? I'm like, why does it matter? Can they afford to pay? Is a real question. You know, why does their credit score matter? I don't care if they have a 500 credit score. I really don't. I mean they can, they, they show that they can make a payment, you know, and obviously you want to have a track record and you'll, you'll look at things. But that's, that's ultimately what it comes down to is you have to have some third parties involved that can help you get the borrower to make sure it's the right borrowers, the right fit for them with the terms and what's they agreed upon, you know, situation there with the interest rate and the payment. How long do they make the payments. And so locally here they've been putting the kibosh on kind of land contracts and we've gotten, uh, some w we would try to push back on it and we did a good job of deflecting that bill that kinda came across and now it's kind of creeping back up. I hear now. And basically land contracts are kind of bad to write anyways because you end up just being the deeded owner. And so what we kind of coach and educate people on, it's like, why have the land contract when you can just create the note and mortgage. You don't have to worry about these laws that they're creating with land contracts. You just create the note mortgage and you're the bank anyways and it's all legal. You go through underwriting and go through all, this is the one of the services that we provide. But people can do this on their own as well, and they can go through one of their loan servicers to do this sometimes. And so we found a way, not way around it. We found the right way to do it. And we found that way, that we're compliant with all the laws and rules and regulations. And that's how you do it. So if you do have a land contract, the good news is you can actually still convert that to a note and mortgage. It really is an agreement between you, the seller, or the bank and the borrower. It doesn't matter who's on the outside looking in. It's what does the borrower and the seller agreed to. And they can renegotiate terms at any point. And that's, that's what's beautiful about it is that, you know, you just offer it up to the borrower and say, you know, you'd like to be the deeded owner. This is going to be a note and mortgage. I'm a step away, you know, and be, have less liability here and less, you know, not be on the deed pretty much. Cause you get tax liens, you get weed liens, get, uh, code enforcement violations, all that stuff goes to the deeded they want on the record. Right. Okay. And so that's kinda my spiel on regulations with land contracts and not mortgages. And it's at a federal level. Okay. With the seller finance coalition that we have, they're fighting it with through Senate and through house to try to get that bill amended to where they'll allow 24 transactions in a year without having to go through the underwriting and stuff. So instead of three, yeah, 24. Wow. That's so significant. Yeah. It's a significant jump and they're not, you know, the right way to do it obviously is to go through underwriting. If you're going to do several of them, that's just the right way to do it because you are trying to make a business out of it. But that's what the word trying to do as a seller finance coalition is to get that bill amended. So that's kind of our big regulation right now. Okay, so what's going down in the market now for the note space is exactly that seller financing. We find that real estate has been at the top of the market for a while now. It's still there and certain pockets that may be dipping and may be climbing, but overall in general, it's kind of right there at the top and maybe rising just a little bit or flattening out. And so now as the time that we discover that having the seller carryback the financing is actually a very strong play right now. So banks are just not lending after a certain amount, like usually around 80 or$100,000. And sometimes the valuations are too high or the bank's valuations come in lower than the purchase pricing. And this is where, so our financing can be kind of strong. So as long as people have a sizable down payment, like you know, 15 20% down, that's a pretty good chunk for these, you know, 70 8,000 120$130,000 homes that you're selling for that you can get, you know, sizeable down payment. So they show emotional equity, they have actual equity in the house instead of putting down$500. And so it just becomes a real nice situation. So seller financing is really hot right now and that's what we're showing people how to do it and how they can capitalize on their real estate and not have to pay all the capital gains at once and they can just slowly pay it and so ends up being a longer play, but it ends up making you wealthier. Hence the two Wells show. Exactly. Can you do notes overseas? Can you do international notes? Well, I'm sure that you can, but I, I don't, I don't know how it works. I'm sure in a different country they have different laws. We've had people that invest over here in the U S from other countries and they, and they kind of tell me that the note business is not really a business and the other countries as it is in our country, we're always trading papers. So, um, that's a great question. I don't have an answer for you, but I would be interested to know, so maybe I can talk to some of our international and find out what is it like to have a note in that country overseas. Yeah. And most cultures are different than us. I mean, you know, as Americans we want debt and other countries don't want debt at all. So they, they strive to, to create, uh, cash investments, right. They want to pay off all their debt. They don't want any debt and we want all the debt.
Elizabeth Maora:Yeah. Speaking of other other countries and kind of how they do finances and stuff there, I just read an article this morning on a new kind of industry in tech is the whole banking because different religions have different way. They look at finances, like Muslims will not accept interest. So now, yeah, they have startups. Yeah. Um, they have startups now that are these makings, um, startup apps, so that if you put$100,000 in there, you're not going to get the, you know, 1% interest that you get if you put it into a normal bank. So it's a very hot tech area. Um, so it was creating these religious, um, banks and other things. So I had no idea. Is that interesting? That's very interesting. So, um, and so just kind of going into as well, like where we're going in the vacation rental space is much more into the professionally managed areas. So, um, we still see a lot of mom and pop and some of them do a great job at it, but we also have people that they just throw literally throw properties up on the listing. So, um, so I think we're gonna be seeing a lot more of that just as customer demand, customer review reviews, um, are gonna, they're gonna dictate that number one. Um, and then two just on kind of the regulation side as well, things that are going to have to be required in these properties and of the property management company. Yeah. So we see a big difference coming up. It's not going to be a real immediate one, but definitely within the next three to five years there's going to be a huge divergence in the industry because of that.
Justin Bogard:Do you feel like the price point that you can get for a daily rental is going to kind of stay the same or do you feel like it's going up or is it depending on the market and the geographic area? I think it'll go up. I was anticipating that answer, but you know, you don't know.
Elizabeth Maora:Yeah, I know it's going to go up. And one of the things too, it's kind of interesting because, um, you know, we do a lot a lot of education here and so some of the other companies, like as soon as I found out that fire extinguishers actually need to be mounted because all of ours were under kitchen sinks, cause I just, I thought that's where they went. Um, and so I let the other hosts that I know around here and then we also did some social media on it. And so that's, it's an expense, right? So when other companies have the same type of expenses that you have things, everything has to go up, right? Yeah. So, and customers don't mind paying additional pricing because they have the property that's fully ready for them. Yeah, I mean that's what I would want when I'm vacationing. Right. Absolutely. What's a fire extinguisher yet? Now I'm thinking about the Airbnbs I've stayed at. Where has this fire extinguisher van? I don't know if it's been readily available on a wall, but I haven't stayed in in Indiana. I've been in other States. So it wasn't one of your, and then your note space, where do you see things going for here in the States?
Justin Bogard:Well, like I said before, I'm preaching on, so our finances, it's just, it's just really, really a good fit right now. People need the financing and the sellers need, should consider carrying the financing for the borrower. It is a great way to build your bank because you don't have to keep the note forever. Right. You can sell the note. And that's what's cool about it. You just treat it just like real estate, except you're on a different side of real estate. You're just in the paper part of it.
Elizabeth Maora:So you could even have a client that sells the property, you write the note for them, right. Or, or they stay on and then they say, Hey Justin, we've had this for a couple of years and we want to sell it. So then you could find somebody to buy that note.
Justin Bogard:Yeah. We've, we've definitely built a database of people that buy and sell and we'd like, we'd like to, you know, kind of marry the two together. So if someone's looking to sell their loan, either, you know, we could be an opportunity, uh, investor to buy it or one of our investors that we work with already may be a person that can buy it as well. So no spaces. Cool. That's awesome. Yup.
Elizabeth Maora:Definitely some fun things coming up and in both of our industries, um, especially, you know, we have an election year. Um, so, so it's going to be big, um, in several different ways. So we're, we're excited for the outlook of the vacation rental industry. Um, we do think rates are gonna go higher. I'm a big advocates. One of the things, um, that my team and I are also advocating for this years for people to raise their rates. Um, it just, it helps, helps everybody. So, um,
Justin Bogard:it's like the reverse of rent control rate control. Alright, well I think that's all the time we have for this episode. This is episode number four of the to wealth show. I'm Justin Bogard.
Elizabeth Maora:and I'm Elizabeth Maora-Sickles, AKA super E, super E baby.
Justin Bogard:And we're sponsored by bright path notes and you can reach them at brightpathnotes.com and Elizabeth Maora, which is ElizabethMaora.com. So until episode five, um, see y'all later. Thank you. To wealth show is produced by Justin Bogard and super E sponsored by BrightPath notes and Elizabeth Maora. Thanks for listening and watching for our show.