Shawn’s background in Real Estate
Shawn has been a full-time Real Estate investor for 22 years. He asked himself the question many of you have asked: with my passion and experience in Real Estate, how do I create passive income? He started a short-term rental asset strategy just before 2006, and now has homes in all his family’s favorite places near National Parks and Beaches all over the country. He took our call from his residence in the mountains of Utah at the base of the iconic SnowBasin. As a father of 11-year old twins and a family man, they have opted to homeschool and travel to their favorite places in Georgia, Wyoming and Florida to name a few, and it is this model that has allowed their family the freedom to do so.
How do I fund experiences with my family with Real Estate assets?
Short-term rentals is a mainstream form of investing, and is an in-demand asset class right now. Not all investments, however, make money the way Shawn’s do. He has a unique background of understanding investors and what it is they are looking for, and he has managed to build one of the largest investment groups in the country. They are looking for partners in the areas of interest who are also sharp on the economics of the asset-class we are working with (short-term rentals).
To borrow the phrase, “the riches are in the niches”. The great news is this is a common market for investors to so-to-speak “get off the sidelines and onto the field”! This presents an opportunity to expand in a time of contraction for a lot of people who can understand what these investors are looking for.
If this niche of short-term rental investment is of interest to you and you are starting from scratch, it will be helpful to understand the economics of this particular asset class, namely the nuances in Underwriting. Here are a list of resources and ideas to get started in this process:
- Understand the underwriting of the Ownership Model (over the arbitrage/Co-Host model)
- AirDNA.co Data Analytics tools for reliable income potential
- Free resources on the subject from Shawn: His Podcast “Vacation Rental Revolution”, his Youtube Channel, his website (Vodyssey.com)
- Books on short term rentals, specifically the Ownership Model from those who have been in the industry for more time than just this current market.
- Know the economics in your area, as well as the income potential in your market region using tools like “AirDNA.co” or “Homebot” (data analytics: occupancy rates, average nightly rates, range of revenue in a market)
How do I help investors mitigate risks?
Investors often fret how a change in zoning may affect their income potential and the ability to operate a business in a particular area, especially for a short-term rental.
Understanding the economics will help you understand the range of revenue based on the area and especially the experience the property provides.
Secondly, per Shawn’s experience as an investor, he put us at ease that zoning changes are actually a misconception. The truth of the matter is zoning doesn’t change, it is often improperly addressed in the beginning, and this means with proper understanding of a particular area, your expertise can help mitigate this risk for an investor. Get the licensing and permitting up front, and avoid buying if it is a gray area.
Is it time to invest in lifestyle assets?
If it’s time for you to start investing, here are some starting points to consider. First, think about the money you’ll need (knowing the offset of the rental income) – investing is not a transactional game! Take your earned income and create passive income to give yourselves a future exit strategy.
- Time: 3-5 hours per week in marketing the portfolio
- Money: a downpayment between 10 and 20% on second-home loans, about 10% for furnishing, launch phase of 6-9 months where you are paying for expenses up front
- Knowledge: whose knowledge and experience can you leverage? Make it an experience!
Leverage these 3! One of the drawbacks is that it can take longer, so being prepared up front can help you be a serious player in this space.
With Short-Term Rentals, You Sell an Experience
A short-term rental should be more than just a place to sleep: it is the hub of an entire experience. In this market, supply has caught up with demand, and in this shift the number one mistake is this: you’re not selling the house. This is what you’re used to in the Real Estate business.
In the short-term rental asset space, you’re selling an experience, and this is what your marketing should communicate. It will also help you narrow in on a target audience and how to cater to them specifically. This knowledge has earned Shawn and his rentals double the nightly rate by offering not just a cabin for example, but a unique fly-fishing experience in Idaho.
This is a reminder to become irreplaceable as an agent of any kind by addressing other concerns and setting yourself apart for having the entire experience taken care of. Price is only a concern in the absence of value: people happily and freely pay for the value of having their bigger-picture needs met!
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