Replacing a Mid-Six Figure Income With Short-Term Rentals in Only 6 months | Cale Delaney

In this episode, I chat with Cale Delaney and we talked about short-term and long-term rentals and different strategies to figure out the quickest way to financial freedom.

Cale Delaney has been investing in real estate for a total of 1.5 years. He bought his first unit in 2006 and now has a total of 10 units (5 LTR and 5 STR).  He work right out of college as a Commercial Real Estate Investment Broker (2006-2008) and sold $7M in RE in 1 year. His real estate superpower is discipline.

Key takeaways from this episode: 

02:41 - Who is Cale Delaney and how did he get into the path of Real Estate?

09:35 - Cale’s first Real Estate deal

12:04 - How to convert a fourplex or multifamily to short term rental properties

13:18 - How Airbnb and VRBO works to get bookings

14:22 - How to determine a market

24:35 - Financing strategies to acquire properties

32:53 - The advantage and disadvantages of short term rental strategy

37:10 - Occupancy projection and strategies to attain it

40:49 - The downside of short term rentals

Tune in to learn more valuable information from this episode!

Subscribe, Listen to our episodes and leave us a review:

Apple: https://podcasts.apple.com/us/podcast/real-estate-investing-for-freedom/id1570870735

Spotify: https://open.spotify.com/show/2d3nMp137jfw6MDyPPsY3j

Google: https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5idXp6c3Byb3V0LmNvbS8xNzkxNDk0LnJzcw==

Connect with Guest, Cale Delaney:

Website:www.airbnb.com/p/mtntoseacabinsandcottages

Instagram: https://www.instagram.com/mtn_to_sea_cabins_and_cottages/

Facebook: https://web.facebook.com/cale.delaney

Connect with the Host, Dalyn Hazell:

Facebook: https://www.facebook.com/dalyn.hazell/

Instagram: https://www.instagram.com/dhazell24/

Email: dalyndhazell@gmail.com

Transcript

Introduction  0:00  

This is the real estate investing for Freedom podcast, where we bring on the experts to teach you the golden nuggets of real estate investing, so you can escape the rat race and start living life on your terms. Now, here's your host Dalyn Hazell.

Dalyn Hazell  0:22  

Hey, what's up everybody, and welcome back to another episode of the show. In today's episode, we talk all about short-term rentals, I was going back through the directory, and I noticed that we hadn't had an episode on short-term rentals. And I brought in a guest named Cale Delaney. And he's going to talk to us about short-term rentals, he's got five of them, five short-term and five long-terms, but specifically the short-term, he's got one in Florida, and four in the Smoky Mountains. And he's been very happy with the cash flow, it's allowed him to leave his day job. And so that's what we want for you guys is to learn about these different strategies. So you can figure out the quickest way to get to financial freedom for you. And before all that though, here's today's golden nugget of the day. Today's gold nugget is count on vacancies. So this time of year, especially for me in the long-term rental space, I'm seeing, it's harder to fill units with quality tenants because fewer people are moving with the cold weather and everything. But that doesn't mean that we cut corners or abandon our tenant qualifying criteria. At this time, we still have to stick to our criteria. And if a rental sits vacant for one, even two months, then that's an okay price to pay, if it means you avoid getting in a poor tenet. And so we want to continue to look for those high-quality tenants. Now on the short-term side, Cale can talk about this during the episode. But he does account for vacancies and actually, it's a lot higher percentage of the revenue for short-term rentals because he knows that during certain times of the year, there are no tourists in that area. But the increased revenue and cash flow more than offsets that increased vacancy, right. So, the bottom line is to make sure you are counting on vacancies, especially this time of year. So with all that being said, Here's today's guest talking all about his short-term rental experience, Cale Delaney. Welcome to the show. Cale. How are you today?

Cale Delaney  2:21  

I'm doing well. Dalyn, thank you.

Dalyn Hazell  2:23  

Yeah, you bet. I'm glad to have you on because first off, tell the listeners. When was your aha moment real estate, I got a chance to read your bio. And it was just really impressive blew me away. But tell the listeners when you stumbled upon real estate and when you decided this is the path for me?

Cale Delaney  2:41  

Yeah, so it's,  it's funny, I was kind of thinking about things today. And you're here oftentimes with people of how the point or the from point A to point B in their lives. That's not a straight line. It's a zigzag. Right. And that's, that's pretty much exactly what's happened with me too. I'm a small-town guy from New Hampshire, that's where I grew up.  I lived around in various towns of,  a few 1000 People with that. And when I was 18, I moved down to South Florida for College, the University of Miami, and got a scholarship down there and went to school for engineering found out quickly. That's not really what I wanted to do.  I didn't have a passion for it. It was just kind of a logical degree to do.  I was good in school, I enjoyed math and science. They go take engineering, right. So that's kind of what I did. And I found out I didn't like it, right through internships. And so my senior year in college, I actually kind of got the bug a little bit for real estate. And it wasn't really very formed at that time of what I was interested in. It was really just an idea of if I want to be wealthy, why don't I start looking at what wealthy people do, right. And so I got involved with a commercial real estate investment brokerage firm down in Miami, Florida. And so I started working part-time my senior year in college and then once I graduated, went full time, and was an investment broker with them. And I sold small multifamily apartments in a kind of an exclusive area in South Florida and did a little bit of retail as well at a state. And I enjoyed it, it was a good experience. It was just very, very terrible timing. That was from 2006 to 2008. And we all know what happened then. And so once the market started drying up, I knew I didn't want to stick with the brokerage part. Right. I did not enjoy cold calls or the hit hell so much wasted time that you have with people,  going on meetings with people that are just kind of tire kickers and it just was not. It was clear that I didn't want to go in that direction. Right and so I kind of put things on the back burner for a long time with real estate at that. the point,  I got some good experience I, I really learned a lot. But still, I think I was just kind of too young and naive, and it was just like, Okay, I just need to get a job and start making some money, right. So I decided to get into construction management, it was, again, just kind of a logical choice based on my degree friends that I've graduated with that we're doing that. And so that's kind of what I've been doing for the past 13 years is construction management. And it really was about two years ago. Yeah, almost a year and a half. Go that I kind of had the lightbulb moment. And just went through a lot of personal changes in my life, I got married about two years ago, or a little over two years ago, my wife had two, two kids already from a previous marriage. And then we had a son of her own, shortly after we got married. So within a period of a year and a half or two years, that my wife and I were dating and then getting married, it was gone from single to a family of five. And all of a sudden, there's all these different responsibilities and things you got to start thinking about, and especially when the young one was born the baby, it just really kind of put me in that position of, I've got to figure something else out like this, I can't, I can't see myself working for another 30 years, doing what I'm doing, just to maybe try to save enough money to retire off and survive. Now I've got to think about kids, I've got to think about all this stuff. And so I just, again, I didn't really know exactly how I was going to get to that path. But I knew something needed to change. And so I just started kind of digging in and I started thinking again, maybe I should look into the real estate,  just going back to when I worked in IT those years past. And so I started listening to podcasts, reading books, and read Rich Dad, Poor Dad, which I mean, I think 99% of people,  that's kind of their, their kickoff moment there. And that's what it was, for me it was really kind of like the nail in the coffin of really solidifying and clarifying a vision forward, kind of once I read that book, it made it just really instantly clear as to this is what I've been doing wrong all these years. This is what I need to do business investing. This is what I need to do to actually create wealth, right? Not for somebody else, but for me and my family. And so once I read that book, it just like I said, really just solidified a vision for me. And then I just I said the real estate's where it's going to be I don't know, again, exactly what type of real estate but it's going to be real estate. And from there, I just dug in, I mean, I literally, from the day I made that decision, which was in I don't know exactly what day but it was in January of 2020. From that, I kind of had that real final aha moment. And from that day forward, I literally just dug in and started researching the market, walking the market that I picked,  sending out offers on Zillow, MLS daily, and just doing all the steps that everybody says to do until I landed my first deal. That's a very long-winded answer to that. But it's really that about a year and a half ago or so a little over a year and a half ago, where I really solidified the vision decided to take action. And from there, it's kind of been,  full steam ahead.

Dalyn Hazell  8:28  

Yeah, that's an awesome thing. Thanks for sharing that I had a similar start where when I got out of while I was still in high school, and I got interested in engineering. And admittedly it was for nothing else than the high salary. And so I went to camps, I actually got a decent scholarship to go to this highly esteemed engineering school. And I got to get into the coursework, and just it wasn't the right fit for me. So you'll find out pretty quickly if something's not the right fit. And so it's good that you got into the real estate brokerage early on, and then you knew that that was the right thing. So you pivoted and now you obviously serve its purpose for a while, and now you're obviously trying to transition out of that into more real estate investing full time. Right? So talk about that first deal you did, I mean, was that you found on MLS or some other conventional purposes. And then we're going to dive into the later in the show short-term rentals in your portfolio. Now, was that was short-term rentals on your mind at that stage? Or were you just thinking like get a rental get or get a flip? What was on your mind going through that first deal?

Cale Delaney  9:35  

Right, right. Yeah. So yeah, the first deal was actually long-term. But I did have in the back of my mind at that point that if I wanted to get into short-term rentals some point. And so when I was underwriting my deals that I was looking at, I was always putting in there,  I was doing a pro forma as a long term and a pro forma as a short term as well. And frankly, I didn't really have  I didn't have the experience or the knowledge to really know true data. And I didn't really even know about air DNA and all these other resources that are out there now for finding it. So I was kind of making some real guesstimates with my, my,  short term pro formas. But of course, they were much, much higher revenue than the long terms. And so it was kind of it, we went into it with the thought of maybe over one to two years, we try to convert some of the long terms into short terms. But it was really just kind of a, an afterthought,  the main goal was, let's get, let's get some deals,  under the belt, let's get some, let's get them stabilized. Let's see how they perform and kind of take it from there. So it was things move really, really fast. And yeah, I just I, I was constantly on evolution, I think in my, in my real estate journey,  just because things move so fast. It was okay,  I want to do it, I didn't want to do single-family homes.  I kind of knew that right off the top. I said, let me look into small multifamily. Right. And so that's kind of what I went into first off, which was a four Plex, which was the first deal. And it was local,  I didn't even want to consider out of state or out of town or anything like that. Just wanted something close by that I thought would be easier. But yeah, just kind of had a little bit of a longer-term goal, or an idea, at least of maybe we'll get into short term. I know that everyone says the revenues better that way. But let's get something that starts small, stabilize it, and kind of see where it goes from there.

Dalyn Hazell  11:35  

Right. So it started out as a long-term rental. Was this a house hack? Or was this strictly a four Plex investment? Are you're gonna run out of all four units?

Cale Delaney  11:44  

This was strictly a four Plex investment.

Dalyn Hazell  11:47  

Gotcha. And so I want to I have a lot of questions with the conversion, because how do you convert a four Plex or any multifamily for that matter, to a short term rental? Like, are there people willing to do a short-term rent on a multifamily building? 

Cale Delaney  12:04  

Yeah, so it was kind of an experiment, the opportunity presented itself. So it's four units, there's one studio to one-bedroom and a two-bedroom and the layout of the property is it's actually like two duplexes on a property, one in front kind of facing the street, and one in back. And we had a tenant that the one in the front, which happened to be the larger two-bedroom face, the street, it was the nicest of the four units, the biggest, etc. They canceled their lease early. And this was right after. Yeah, this was a month after, not even a month after I had just gotten my first true short-term rental cabin in the Smokies up and running. And even in that very short time, I saw how amazing the potential was. And so when they canceled that lease early, I said, alright,  let's, let's take this opportunity, let's give it a try,  we can always go back to a long-term rental, if this doesn't work out, let's give this a shot. And the unit was in decent enough shape that,  we didn't have to do any remodeling or anything like that. We just, furnished it out, decorated it nicely, and then put it up on Airbnb and VRBO. And, I mean, it was just, it's kind of funny, especially when, with any short-term rental, it's just kind of how the algorithms work with Airbnb and VRBO. It's like when you first list the property, and they do it, I know, they do it on purpose. I mean, psychologically, it's like, it's addicting because they boost you in their search rank. And so, so much when you first list a property that literally within hours, you've got bookings, and you're just like, oh, my gosh, this is amazing. Like, this is incredible. I just made and in three hours, what I make in a month,  for a long-term rental. So it's kind of funny how they do that. But that's how it went. We spent some time just decorating it furnishing it listed it like literally within hours had two weeks booked. And it was making more than it was gonna make as a long-term rental right off the bat.

Dalyn Hazell  13:59  

Right. So I'm interested to hear how you chose your market because you said earlier that while it was just close to you, now you've spread out to the Smokies, so how do you determine a market? If you're just a beginner looking in how do you determine that? Are you looking at rents competition? Or, like how do you underwrite that?

Cale Delaney  14:22  

Right? It all depends. I mean, there's a lot of factors it, it can be a very personal decision, or it can be a very analytical decision, right? When I was looking initially, and when I chose that local market, first off, I said, it's got to be local, just because, again, kind of just kind of that I'm brand new, you have those fears. You're nervous, how in the heck would I do something out of state,  you just don't even I didn't even want to think about that. But we'll touch on it later.  I'm sure but going back now, I mean, the out-of-state is so much easier than the local. So I just want to go local. I want something that's gonna against small multifamily that,  in the future would have some short-term potential. And so I just kind of,  started thinking and looking around my area, and there's a little beach town 20 minutes or so for me, it's not directly on the beach, it's about a mile or so inland from the beach. It's kind of like a little artsy, they call it like little Keywest. Stevens very kind of artsy, quirky little area, but it's all small, multi families,  duplexes, triplexes quad flexes. And there was already a bit of an established Airbnb market or short-term market. Not humongous. But there's a handful of properties there that people do it. And so I just kind of picked it up. So that looks like it kind of checks the boxes and picked it up and just started digging in. So that's kind of how I went with that way. As far as once I really made the decision to go full in on short-term rentals. That one was a little bit by chance, and that it was actually another podcast, I was listening to the I'm sure you're familiar with the bigger pockets, real estate rookie podcast, I happen to listen to an episode. And it's actually, gosh, almost a year ago to the day, I happen to be listening to an episode where they were talking about short-term rentals in the Smoky Mountains. And it just like, again, a light bulb just went off like, oh my gosh, that sounds amazing. And I didn't even know where the Smoky Mountains were. So after that, after I listened to it, I literally Google map that and saw where it was, it was written within relative driving distance,  from us, and packed up the entire family, we even had our two, a niece and nephew staying with us at the time. So like a minivan full of seven people and luggage, threw him on the car drove up 16 hours to the Smoky Mountains, and just started checking out the market met with realtors. And again, just kind of going all in started looking at all the revenue, the prices and just digging in real deep. So again, it was just kind of one of those, you hear people say success leaves clues. And so once I heard that once I heard the potential of that market. I mean, I just took the action of let's go out there. Let's look at it. Let's start digging in and seeing if this makes sense or not.

Dalyn Hazell  17:22  

Right. And even though you were out of state you made that trip, I think that's really important to learn about the local market there. And if nothing else, make a vacation out of it. Right? You already got the kids and the wife. 

Cale Delaney  17:38  

Right. Exactly. We did get in some hiking there. And I agree, I think it's important and,  other people have different opinions as to whether you need to visit the area or not. And technically, you don't need to you can get all the information you need from people there. But for me, at least,  it's just kind of seeing it and touching it feeling it getting that experience,  even if it's just for a few days, just instilled a whole lot more confidence than just picking a point on a map,  and looking at listings online. 

Dalyn Hazell  18:12  

So sure, so once you've found a listing, I assume you were talking to you said realtors, and you've found some listings, most of these properties, I would imagine, don't come cheap, because they're all They're nice. They're in a great location. And in the builders, the owners know that people come in and are going to make a killing off of these so they can jack up the price. How did you just pay fair market value for these properties are the first one you had.

Cale Delaney  18:41  

Yeah, so that's, that is very true. The Smokies market in particular is absolutely insane. And it's only gotten more insane, even this past year. But yeah, when I first started looking at the listings, I mean, yeah, I had sticker shock, big time.  compared to, I mean, even the four-unit property that I bought locally,  just one cabin is,  50% or more,  costly that I paid for these four units here, more than double that I have in my own house that I live in. And so I got big sticker shock when I first started looking at this and I was like oh my goodness, this is I don't know this a little scary, frankly. And then you talk with a real realtor and you start hearing how everything that's being sold is as soon as it comes on the market, it's getting multiple offers, things are going for way above the asking price. And so I kind of struggled with it. At first, I really did when I came back from that trip.  I knew I wanted to get into that market. I knew I wanted to get into short-term rentals. I just need to figure out how because again, these prices are super high, this atmosphere of super competitive like I don't like paying more Then somebody is asking, if anything, I want to pay less like, isn't that the whole point, right? And so it was about, and it sounds like a short period of time. But for me, like, and for that market, it's almost like an eternity. Like it was about three weeks, that I kind of just pondering and debating, and just really looking at tons of listings every single day analyzing deals every single day. And I knew, and I quickly saw that, as soon as these properties come on the market. I mean, it's like a feeding frenzy. I mean, they'll come on, and within a day, two days, I mean, they've got multiple offers there already, they've already got offers,  1020 30 40%, above asking price. And if you try to get into that game,  you gotta be prepared to pay top dollar, or really know what your limit is. Because,  it's easy to get into that, get the emotional aspect into it of, well, I'm not going to lose this deal, right? Fine, I'll pay this much. And so I didn't want to get into that game. And so I said,  let me just let me take a look at some stuff that's been sitting on the market for a little bit. And, there are some cabins that I saw there, and I checked with my realtor, they Hey, this one kind of looks nice,  it's been on the market for a few weeks what's going on. And most of them came back and that there's some,  there's some big issue with them, they need tons and tons of work that the seller is not going to offer anything for you take it or leave it, or there's something wrong with 90% of them. Right. And there's one that I saw that, again, had been on the market for I think about three weeks or so, brought it up to my realtor. He's like, huh, I don't know, that one. Looks pretty decent. I haven't heard anything about it. Let me check it out. And so he went, checked it out talked with the listing agent, no big red flags, no real apparent reason why it was sitting on the market still. And even then I kind of debated on it, because it was a big-ticket. They were asking 700,000 for it. And so I still kind of sat on it. And I just, I was to the point where I was like, Man, I want this property so badly. Like I really want this property. But that's a lot of money. I'm just going to kind of, I'm going to let it be. And if it's meant to happen, it'll happen. And listen to your podcast,  I know you're, you're a man of faith. And,  myself as well. And so as I was praying about it, and I just said, Look,  Lord, if this is the direction you want me to go with this, the property that's meant to be confident that it'll happen if it's not helped me with being discouraged and keep me in the game. And so I was like, I'm just gonna let it sit for a week. And if it's still available, I'll make an offer. And so that's what I did let it sit. It was still available. I made him an offer at 650. And they accepted. I was like, Oh, my gosh, I guess it's starting. And,  so that that's how I got that that first one. And it just really worked out very well. And again,  I feel it kind of happened for a reason. But that family that owned that one, actually had two cabins next door to it that they were looking to sell as well. And so we found that out during the while we were under contract on this first one. And so after we closed, we immediately negotiated with them on these other two, and got those under contract and closed. So within like three, four months,  we all of a sudden have three cabins. And then kind of repeated that for the fourth one, which we have for now. Did that same thing just kind of looked at ones that have been on the market, found one that looked good, made an offer, they accepted it, and lo and behold, so that's been my, my strategy, and it's worked out so far. I think it's getting harder and harder though, as the market gets crazier and crazier.

Dalyn Hazell  23:51  

That's very exciting.  it's just going to show that you can make offers on properties that are sitting on the market for a while. And that can be a great strategy. And I bet you never would have thought you were gonna get a property under the list price, that sort of competition. But you did, because you found a way and then that it's just amazing that that then open the door to two more. Right? And now you've got four. Yeah, so how did you finance those? Because a lot of people would probably ask 20% down and 700,000 That's a lot or so were you using the typical 20%? Or could you do 10%? Or what financing strategy did you have for those initial acquisitions?

Cale Delaney  24:35  

Sure. So the four Plex, which was the local one, that one so I actually partnered with My Father on that first deal. And that one, we actually put 25% down, which was kind of the best we could find at the time and you got to remember it's when we were under contract with that it that was right in the heat of COVID Right, that was when everything came crashing down. And so lenders were tightening up. And so that was kind of the best we could find was 25% decent interest rate, but a big down payment. But,  again, I partnered with my father, so we split it 5050. So wasn't too bad. The cabins,  thankfully lending, it's starting to ease up a bit by that time. And one of the huge advantages of getting out of state or out of town even doesn't need to be out of state, but out of town, at least is you can take advantage of a second home loan. And that allows you for 10%, down with excellent interest rates. So you can only do that,  one property in that particular market, right. So that's why a lot of people when they do multiple markets, can repeat that process and just do that 10% down. But otherwise, you want one of those products in each of those markets. So we did that first cabin with a 10% down.

Dalyn Hazell  26:05  

Look, can we stop to explain that a little bit further, because so anybody can take advantage of this with 10% down in its per market is what I'm hearing from you. So if I have a home in town that I just bought, then I live there, then I can also buy a second home in town for 10% down.

Cale Delaney  26:25  

So no, so you would have to be It can't be the same town as you live, right? It's got to be and I don't I don't think there's a specific like mileage. Honestly, I'd have to check on that if there's or not it's but if you got let's say for example, like the Smoky Mountains, the two main cities there are like Pigeon Forge and Gatlinburg,  they're about 3030 minutes from each other. So like if you buy a property in Pigeon Forge with that second home loan, and then you say, hey, I want another vacation home in Gatlinburg. A lender is going to look at that site. Now. I don't think you own this home? Right? 30 minutes away. Right? It's got to make sense. Right. But if you have one and pitching forwards, and then you I don't know, what's the town like Asheville, North Carolina, right, that's about an hour and a half away? Sure. Well, now that's a whole separate Metro. That's a whole separate market. Yeah, that you could get a second another second home loan there.

Dalyn Hazell  27:21  

Okay. So that's interesting. What are the limitations around that? Like? Is it a second home forever? Or could you refinance that into a different loan product? Are you sure about that?

Cale Delaney  27:33  

Yeah, you can absolutely refinance to do everything, like a typical residential loan,  it is a residential loan. So yeah, you can cash out refi,  into another product, you can take a HELOC. I mean, technically, it's still considered, I think, for HELOC, I think it would still be considered as an investment property. So,  you got different terms with investment, HELOC versus primary. But yeah, it's the same processes same everything pretty much as if it was you buying your primary home.

Dalyn Hazell  28:04  

So it's not really a second home because you can have multiple, it's more of a vacation home product. Right. Right. Exactly. And you just want to make sure with your banker that you can rent out the home.

Cale Delaney  28:15  

Right, correct. Yeah, absolutely. Yeah, you got to talk with your lender,  be upfront,  there's no shady don't do any shady business,  but if you're clear with what the intentions are, that it is truly going to have some type of personal use,  as well, that is not just purely investment property. And typically, that's how these vacation rental or short-term rental properties are,  a lot of the owners want to use them for personal use as well. So yeah, you just got to go over the specifics with your lender, make sure that what your intentions are with the property line up with that product. But for the most part,  it's a pretty readily available product.

Dalyn Hazell  28:51  

Okay, great. Yeah, I just wanted to stop on that topic, because that's something that most people can do. It's really doable. 10% Downs. Great. Right. And so you can continue talking about how you finance those other deals?

Cale Delaney  29:04  

Yeah. So from there, all three other cabins were done with 15% down just investment property loans. And so I mean, that's still those are still conventional loans. So they do require,  a certain debt to income ratio, which I think was 50% was the max on your debt to income. And what those three or four cabins I pretty much tapped out,  that that's I'm kind of looking at different avenues right now for commercial loans or loans that don't make your debt to income into factor right now. Because I'm tapped out but if you have a W two or whatever, you have a reportable income on your tax returns, then you can continue to get conventional financing up to reaching that debt to income ratio, Max. And so that's what I did and that allowed for 15% down loans on each of those three next cabins. And, yeah, that's how we, that's the loan products did a variety of things for the actual down payments, the four Plex and the first cabin. Those all came from savings, and then translate the second, second and third cabins, I had actually taken a HELOC out prior and 2020. I had taken a HELOC out on a single-family home that I had which it used to be my primary. And then when we got married, we moved out got a bigger house. And I'd rented that one out. And so I was able to get an investment loan or investment HELOC on that house for about 150,000. Right before they cut it off, it was actually the day before that bank stopped offering that product anymore because it COVID Like I literally got my application in the day before. So I use that HELOC to pretty much take care of the downpayment on those other two cabins. And then the last one I did, I took out a 401k loan, which is another great tool for people if you have a 401k, you can take out up to $50,000 penalty-free for any reason, right? It's just a general-purpose loan from your 401k. And you pay it back like normal. If you have a W two, it's directly taken back out of your paycheck at an established interest rate that you pay to yourself. Right. And so I did that in combination with some additional savings to finance that fourth one.

Dalyn Hazell  31:40  

Yeah, thanks for explaining, there are a lot of different ways to finance these, I will say the hurdles are probably a little higher for a property like this than maybe the rundown house in your backyard. So like, for me, when I got started, I was buying 30,000 $50,000 houses. And that's a much easier conversation than what you're talking about. But for those people who want to really jumpstart their journey and like, get into the more, maybe, like classy assets,  and more A and B class where you get that those higher rents, then saving a little while longer doing a 401k loan, those types of strategies can come into play. Right? And so great. Yeah, can you talk about, and this is something I'm personally interested in is converting some of those long-term rentals that we've gotten from the bur strategy in converting into short-term rentals. Because my mind says that can be really powerful, right, you already have the house. So just changing it into a short term should be pretty easy. What are the advantages and disadvantages of that strategy?

Cale Delaney  32:53  

Sure. The first thing you really got to check out is, is the regulations, right? You got to number one, see whatever municipality you're in, or if you're in an HOA,  our short-term rentals allowed, right? That's the last thing you want to do is go through all that effort, thank you got it all up and running, and then get shut down. All right. So that'd be the very first step is to check on the regulations. The second thing would be to get on Airbnb get on VRBO and start scoping out that area. We do with the realtor group. And another group of cabin owners that I'm a part of out in the Smokies,  we call it the enemy method, which is basically looking on,  Airbnb or VRBO, for similar properties,  as yours, seeing what they're going for looking at all the different dynamics. And that's a great way to kind of gauge the revenue potential for your property. So you can do that enemy method, you can look at air dna.com, which is another great website that has,  tons and tons of data, and it will give you guesstimates or estimates of short term rental revenue potential for a property if you just type in an address, and fill out the information on it. So,  do your due diligence on that and see if the numbers make sense, chances are they're going to if it made sense as long term. And then,  from there, again, just kind of look at the logistics of the property. For me, as I said, it was converting multifamily, which has a little bit more dynamics than if you're just doing a single-family, right? Because now you got to worry about while you get shared walls, you've got other tenants there that are long-term tenants, how are they going to react to having short-term, short-term guests there. So a little bit more factors to take into consideration. And then if everything checks out, if it looks like a good area looks like there are other properties in the area that are doing it, they're doing well. And there's some type of attractions that are bringing people to that area.  from there, it's really just figuring out what you want that property to be, right? Because you can be I mean, if you look on Airbnb or VRBO, you'll see the whole spectrum of types of properties. I mean, you see ones that somebody clearly doesn't know what they're doing or doesn't care, and they took pictures with their, their iPhone that is,  half dark, and you can't even see what the heck you're looking at. Or you have ones that are professional photos that look really nice, really good descriptions, and you know what they're doing. So you can have a whole spectrum and you can figure out where you want to be in that spectrum, right?  maybe you don't want to be the top top top, maybe you want to be in the middle range,  whatever. So figure out what you want it what you want that property to be if you want it to be some type of kind of themed type property. For example, that one we converted in the four Plex, it's about a mile or so from the beach. So we wanted to have it be,  kind of a beachy,  coastal feel to it. So that's how we picked out the decorations.  it's got that nautical theme throughout the property.  that's really the basics of it. I mean,  renovations, if you want to get into renovations, that's another thing to take a look at. And really, you just got to think and run your numbers of,  what can I make now as it is versus what can I make with it renovated? And how long is it going to take me to pay that back? And does that? Does that meet my criteria for it? 

Dalyn Hazell  36:23  

Yeah, definitely because guests are going to expect it to be furnished and decorated. So you have to weigh that upfront cost versus a long-term rental that you just lease it out empty, and the tenant takes care of everything except a few appliances right in Now you're tasked with furnishing it completely. If you're getting double the rent, and we have to come out of pocket 10,000 for furniture, I mean, it could be worth it, you just have to run the numbers. Right. So that's another thing, I wanted to add, how do you? How do you budget for your pro forma? How do you budget for that? Because how do you know? How many days the property is going to be rented? Right, you kind of know your expenses. But how can you budget for your occupancy?

Cale Delaney  37:10  

Right? Yeah, good question. So that's where kind of similar thing the enemy methods, and air dna.com and talking with your realtor, and if you can, other owners,  those are going to be the key resources and figuring out that occupancy.  if you're working with a good realtor, who is specializing in short-term rentals, which,  I would highly advise if anybody's looking to specifically get into short-term rentals, get with a realtor that is specifically doing that,  it is a different ballgame. So yeah, find the right realtor, that's going to be key, that person right there is going to be able to tell you, your bookends, right your range,  this, this property, this type of property should be able to make between X and Y, right. So they should be able to give you that information right off the bat,  they should be able to tell you what the,  estimated occupancy should be. But from there, you should kind of back check it with those other methods right, at your DNA, enemy, enemy method, etc. And then for me,  I always like to underwrite conservatively. So even back it down a notch, like if the anticipated occupancy is 80%,  maybe I'm going to underwrite it at 70. Right? Because I want to, I want to make sure that if I screw something up, I missed something in my analysis that I  at least I've got a little bit of a buffer there. So that's, that's the best way to figure out your occupancy and your projected revenue ranges as well.

Dalyn Hazell  38:40  

Right. And so for those people who maybe live in a town where there's not a lot of attractions, not a lot of exciting things going on, like the beach or the Smoky Mountains, does your short term rentals still work in those types of small? Midtown markets?

Cale Delaney  38:57  

Yeah, I mean, and that's, that's really the cool thing. And it's just growing more and more is that? Yeah, you can find short-term rentals anywhere. It's funny. Actually, I was just reading a post on Facebook. I think it was yesterday, that is a similar type of question. And somebody responded, hey when I look for,  an Airbnb property to rent for myself, all I'm looking for is that as close to water because I want to go fishing. Right. So I mean, that's, that's the attraction that that person is looking for,  he's not looking for a national park. He's not looking for a stadium,  so there are so many people out there, somebody is looking for something, right. So yeah, you can be in the middle of nowhere. I mean, it's especially over COVID, this,  this period, it's become more and more of a trend for this getting back to nature and,  disconnecting or reconnecting whatever you want to call it. So the more rural are clamping,  that's become a much, much bigger thing nowadays. So, yeah, I mean, farm stays,  that's, that's big. I mean, there are just so many opportunities out there. I mean, the fact that you can just even rent out a room in your house, and that can be considered a short-term rental, right doesn't even need to be the whole property, it can be just a room in your house. The fact that you can do that and do that successfully, just shows how much potential there is and how much range of options and desire there is for this type of market.

Dalyn Hazell  40:37  

There's so much potential. Yeah. So this sounds so great. And we've painted a flowery picture, what are some of the downsides or ugly sides of doing short-term rentals?

Cale Delaney  40:49  

Oh, yes, it is not all roses. Tell you that much. So first off, it is an active form of investment, right. And it's even treated that way for tax purposes as well. Which has some extra benefits that we should touch on maybe after as well but it's definitely more active for long-term rentals as long as you have some decent tenants who are kind of set it and forget it. Hopefully. Though, I gotta say my first six months with that. Four Plex's short-term rental was an absolute nightmare. Tenants getting arrested for domestic abuse, I mean, it was just it was an absolute nightmare. But once you get the right tenants in, you know it can it should go a lot more smoothly, like you don't hear from him, right until something breaks or whatever, but it's Yeah, short term rentals are a lot more active. So it's a daily thing. And I probably spend a little bit more time than I really need to, I've only been in the short term market for actively running properties for I mean, less than a year now, I'm still learning, I'm still trying to figure things out figuring out systems and getting those in place. So I work on it daily in terms of checking things,  dealing with messages dealing with vendors, your cleaners, handyman, etc. So that's number one is it's a lot more active, right? Number two, is you're dealing with people. So you are going to get the not nice guests every now and then you're going to get the extremely picky ones who just are going to complain about absolutely everything, you're going to get the crazy ones you're going to get, I mean, everything in between, at some point, and there's gonna be some nights where you're like, why the heck am I doing this? But that's where that's with anything, right? You just got to be you got to understand that that is the business that you're getting into. And that, number one, it's a business that does not a hobby, this is a business now if you start getting seriously into it, and this is what you've chosen, you've chosen to provide a service for people, they have expectations, and you can't please everybody, right? 

Dalyn Hazell  43:09  

And I shouldn't have high expectations. I mean, the rental rates reflect that. Right? But it can be, it's, I guess it's more frustrating for the owner if they don't have the systems in place when you just click a few buttons or make a few calls. It's a lot easier to deal with those setbacks. And so that's why,  I would suggest having those systems in place, but even with your first Oh, restaurant,  I made the mistake of not having those systems for my first long term. And yes, problems come up less frequently, because it's a stable tenant, but they still come up and you can kind of you panic or scramble. But if you have the system's kind of almost takes care of itself.

Cale Delaney  43:51  

Right. Yeah. Yeah. So yeah, that's, I mean, frankly, that's the hardest part of it is dealing with the guests,  when you have those, those ones that are just unpleasant,  in fact, just this past week, I had one of those.

Dalyn Hazell  44:05  

And you have to you have an image to uphold you have reviews, whereas if you have a bad long term tenant, you can just forget about them never see him again, right, and but you have an image to uphold with this type of business. Right. So talk about how you're now up to 10 units. And some of them are short term, some are long term, why not just make all of them short term, if the money is much better?

Cale Delaney  44:31  

Yeah, that may eventually happen. As I said, we converted that one at the four Plex into the short term rental, the other three, we still have that plan of doing that, eventually, those three units would require some more, not anything too extensive, but they would require some type of renovation, plus the landscaping and things like that. So it's a lot more upfront costs on those ones to get those up and running. And it was just with everything that was going on with me with these cabins. Frankly, I just didn't really have the mental energy to really put that much focus on trying to now convert those three. So,  my focus right now is on these cabins,  and even acquiring more. And once I get to a point where whether it's no longer having the W two or better systems in place,  where I can free up some, some more time and mental space, then,  I think we'll revisit converting those, but for now, I think it still makes sense.  I think it's good to have a mix or have some diversification. So,  have some long terms have some short terms.  even my long term goals,  are to really probably get a few more short terms are enough to get myself in a very,  comfortable position,  from an income standpoint and then branch out into, I'd like to get into some larger multifamily whether it's through syndications or, or partnerships or something. But I think the way I look at it is that the short terms are an excellent vehicle for just for cash flow. Yeah, for fast cash flow. Short-term rentals are the way to go. I don't know if there's another asset class that beats it. Right if you do it right. Once you get to that point where you're comfortable with your cash flow, then I think it's important to start branching out and really diversifying yourself getting yourself,  a stable foundation and in other asset classes, because there is a risk with short term rentals, right, with higher returns, there's always a higher risk. So, I mean, when COVID first happens, the short-term market was pretty much shut down for a couple of months. I mean, that came back with a vengeance. But during that time, I mean, thankfully, I wasn't in it at that time. But,  I've heard stories, and I can just imagine if that was me, I mean, you don't know what's going on all your income just dried up overnight. I mean, that's a scary thing, right? And you don't know what's going to happen when it's gonna come back. So there's definitely an inherent risk with it, that you should look at diversifying with something else, whether it's long terms or even,  doesn't have to even be real estate. But you should definitely look at other asset classes once you get to that point.

Dalyn Hazell  47:04  

Yeah, it's great to diversify. You mentioned that word. And that's why you have short term, you have long term you're getting into multifamily. And so if everyone can really learn diversification,  we hear about it in the stock market world, but it does transition over to Real Estate. And that's something that's honestly held me back is,  the city shutting the rental, short-term rental market down any moment. And so I have to push past that fear. Maybe you start with one too, and then scale up from there. And you're also,  even if you think long-term rentals are the safer way to do it. I mean, you're still taking a chance, because there could be a mass decrease in rent, or if you're putting all your eggs in one single market there. So we're always taking risks, right? It's just how much of how much risk are we talking? And what are we doing to mitigate that risk is important.

Cale Delaney  48:01  

Right, exactly.  and that's where if you're looking into short term rentals too,  we touched on earlier that I mean, you can do it anywhere, literally, but,  looking at markets that are established short term rental markets, or tourist markets, like the Smoky Mountains, like Joshua Tree in California, is an up and coming place, like the Florida Panhandle. I mean, if you're looking at markets that have an established industry of short-term rentals, that tourism is the main industry, the risk is mitigated a lot more in terms of any type of regulations that could shut things down. Now, of course, it's not gonna have anything to do with a worldwide pandemic, right. But at least in terms of legal regulations, shutting things down,  you can pretty much kind of count that risk out. If you look at those types of markets, of course, those markets going to have higher barriers to entry. Right? Those are going to be the more expensive ones, but also have the potential for the greatest revenue as well.,

Dalyn Hazell  49:03  

Okay well, it's been an awesome conversation, we're approaching the hour mark. So I want to wind down here and keep it concise. Want to hit into the last portion of our show, it's called the triple threat, we ask the same three questions to each guest. The first one is, what has been the biggest app resource or tool that has been the biggest game-changer in your business?

Cale Delaney  49:53  

Yeah, I mean, from a tool standpoint, it's got to be the phone. I mean, especially with the short term, it's just amazing that you can literally run your entire business from your phone. Just a quick example of how awesome it is is that actually, when I got the invite from your VA, to join your podcast, I was actually in Colombia, on vacation there. America's Yeah. Oh, wow. So were there for two weeks. And it was kind of it was a vacation, it was kind of a test pilot as well as to how well can you manage something International. And so there were times where I was literally in the tiny little town, in the mountains, hours and hours away from any major city, and taking care of things. I mean, I was literally in a town square in this tiny little town in the mountains, taking care of, coordinating with my cleaner and my handyman,  to take care of an issue with a tenant or a guest. So, I mean, the power of that phone is absolutely incredible. And just to tie into that, I mean with short-term rentals, specifically, having a PMS or property management software, that's crucial that will link your calendars between different platforms like Airbnb, VRBO, or booking.com. Or wherever you're going to, you're going to list your property, it'll sync your calendars, there are the options for automated messaging, to be able to try to streamline things for the guests. So having that software is going to be your number one software as well.

Dalyn Hazell  51:23  

Yeah, we take it for granted, but 15 years ago, you couldn't do most of the stuff we do today with technology. You had to just be right next to your property over they, they call for a maintenance problem. You got to run over there and fix it.

Cale Delaney  51:36  

It's a blessing and a curse, right? I mean, it's a blessing I guess you can do almost anything from anywhere, that's a curse because you're stuck on that thing. You're glued to that.

Dalyn Hazell  51:45  

That is true. You got to set it down sometimes. Right? Question two, what has been the biggest learning lesson in the last year for you?

Cale Delaney  51:55  

Yeah, that's a good question

Dalyn Hazell  51:58  

Could be a failure or a success that you had that you just learned from.

Cale Delaney  52:03  

I think the biggest learning experience, it's something I'm still learning is the power of relationships, especially in again, the short term rentals and when you're in these very tight-knit touristy communities is that you've got to build the right relationships and you'll foster those relationships with your, your cleaner, your handyman,  any other vendors that you deal with,  other owners, realtors, everybody that you that you're going to work with, you can really get to foster those relationships because they're so essential to your business, and your growth, that if you burn a bridge with someone, I mean, it can easily cause repercussion, big repercussions for you when you're in those, those tight-knit markets. So building those relationships, getting your team members, and fostering those relationships. For example, one thing I'm doing right now,  the holidays are coming up. And we've had to transition our cleaning teams a few times. Now since we started, we're on our third and fourth cleaning team. So we have now we have two cleaning teams for our cabins up there. And so we're going through right now and kind of writing them all, not only the owners that we deal with, but the each every single cleaner that comes to our cabins. We're writing them all personal handwritten letters, on cards,  giving them some type of gift for the holidays, and just trying to really build that relationship with our cleaning staff because we their key,  they do the dirty work for you,  literally, and it's a job that's it's hard to find a good one. Right? And it's hard to keep a good one. So that's kind of our goal is to really try to develop and foster these relationships with our key team members.

Dalyn Hazell  53:55  

Yeah, I love how you do that. And it's, it's a great way to separate yourself from other investors who maybe aren't doing that. Because for those folks who are doing that type of work, I know right now,  they can be picky and choosey and they have plenty of work. So if exactly, we're able to take that extra step show appreciation, then that'll, that can bring them back to you over? Yeah, exactly. Question three, our podcast is all about helping others achieve freedom with real estate investing, whether that's a financial lifestyle, or otherwise. So what does freedom mean to you?

Cale Delaney  54:34  

Freedom is having time to do what I want. Meaning, be able to spend time with my family be able to travel, not have to live in this kind of Monday to Friday world where you live for weekends, or for a vacation, I'd seen a quote somewhere that I want to build a life that I don't need to take a vacation from. Right, because I think so many of us, including myself, still at this point, is living a life where you look forward,  you live for those vacations, right? That that one or two or maybe three weeks, if you're lucky a year,  that you can get away. And I don't want that I don't want to live like that for the rest of my life.  I don't want my family to have to live like that. So to build a life like that, I don't need to take a vacation from that life to have that freedom to be able to spend time with my little two-year-old son when he wants to, he wants to see me but I have to go take a call or I have to be in a meeting or you know this or that. To me, that's freedom really just buying back my time. I've been selling myself,  for so long working in a WTO world. It's time to start buying back my time and my freedom.

Dalyn Hazell  55:49  

Yeah, well, you're on your way there. I've heard it doesn't take too many short-term rentals to get there and you're getting there. 

Cale Delaney  55:57 

So yeah, that luck to you. Yeah, if I can I don't know if we have the time but just real quick is just the like you mentioned it doesn't take a lot right if you get into the right markets and find the right properties. I mean, you can meet your goals so much faster than you expected. I mean, I met what was for me aggressive five-year goals in less than a year. And it's it's just been absolutely amazing what the potential of it is. So,  some headaches to deal with in the process, but the benefits far outweigh that.

Dalyn Hazell  56:28  

Yeah, with real estate you're buying some you're working to afford something that'll pay you for the rest of your life. Thanks. Oh,  going through a remodel or one bad guess should not stray you away from your lifelong potential. That's what I always try to remember when, like I'm acquiring an asset. And I have a setback, right? Just realizing like, I'm so young, and this is gonna pay me for the rest of my life or good. Yeah, it kind of puts it to perspective for you.

Cale Delaney  57:01  

Right? Yeah. And that's, I mean, I gotta give kudos to you. I mean,  anybody, any other young investors out there? I mean,  I just know, when I was that age,  again, I wasn't, I probably just didn't have that, that vision in my head,  to really make those steps forward. And,  for someone like yourself,  who's doing that. I mean, you're just gonna be, you're gonna be killing it,  and get to where you want to be so much faster, than everybody else. So yeah, man, keep it up, man. And you're going to be crushing it.

Dalyn Hazell  57:35

Thank you. Thank you. Where can listeners learn more about you? To follow your journey?

Cale Delaney  57:41  

Yes. So I'm on Facebook. Just kale Delaney. You can find me there. I'm on. I am technically on Instagram, I'll be the first to say that I am not very good at all about checking it or updating it. That is a goal. But it is there which our handle is for our properties. But it's mountain MTN to see cabins and cottages,  an underscore between each one so Mountain to see cabins and cottages, that's our Instagram, where you can see some of our properties. And hopefully, we'll try to get updating that a little bit better. But those are probably the two best ways to find me there. And yeah, reach out. Happy to help actually had somebody reach out to me this week,  that heard about it on another podcast there. So yeah, it's always cool to help out,  and that's one of the awesome things about real estate is there are so many people willing to help.  it's one of the very few industries that I've found where it's not a dog eat dog world,  there's that prosperity mindset and everybody is willing to help everybody. So feel free to reach out.

Dalyn Hazell  58:57  

Thank you for providing your expertise in short-term rentals. This is our first interview with a guest on that topic. And so I'll definitely direct everyone who has questions on short-term rentals back to this one because you've described it very concisely, and I appreciate that. So thank you for being on Cale and have a great rest of your day.

Cale Delaney  59:17  

All right. Thanks, man. Appreciate it.

Outro 59:19  

Thank you for listening to the real estate investing for Freedom podcast. If you enjoyed the show, please subscribe and leave us a review and tune in next week for the next episode.