Clint Harris began investing in long-term rentals at 26 years old in 2009. He owned eight long-term rentals, collecting $26k in annual rent. In 2018, Clint pivoted to investing in short-term rentals in addition to holding down a full-time medical equipment sales job. His short-term rentals now generate over 300k a year gross, with a net of 120k.
You started out long-term rentals. Why did you decide to pivot to investing in short-term rentals?
Traditionally, if I bought a single family home with cash, I would have good cash flow, but all my money would be stuck in that property.
To get cash out, you have to refinance. However, when you refinance a long term rental, you completely cannibalize your cash flow. So I went from making $700 or $750/month to making $150 to $200 a month. I just realized in order for me to scale and get where I wanted to be financially that investment didn’t have enough velocity to it.
Also, a lot of times to get that cash flow at the rate that I wanted, I had to buy properties in marginal areas that, over time, is not really going to appreciate. The difference with short-term rentals is velocity.
You also tried flipping homes, how was that experience?
We did a couple of flips. We made money on every single one but it was a lot of trial and error and kind of figuring out as we went along.
What I learned about flipping homes is that you get paid one time. When you stop working you stop getting paid.
So I’ve always been looking for something that was going to continue to pay and continue to cash flow.
How did you get started investing in short-term rentals?
In 2017, my wife and I moved to Wilmington, North Carolina. It’s a small, historic, coastal town. The beach is in fairly close proximity to the downtown area.
One of the things that we stumbled across is the idea of doing short term rentals and beach properties. But as people warn, it’s going to be highly seasonal. You’re going to rent out for three months and the rest of the year it just sits.
But we kept looking into it. I discovered a data scraping company called AirDNA. It can show you exactly what people were booking in your area and how often they’re staying.
It shows you the average daily rental rate, the occupancy rate, and the seasonality. It took a lot of the speculation out of the picture. Once I knew that the data was out there I just started digging through it.
So using that data, my wife and I purchased a duplex at Carolina Beach about 25 minutes from downtown Wilmington, two blocks off the water. It’s an upstairs/downstairs duplex, three beds-two baths with separate entrances. We got it for $330,000.
How was renting it out at first?
We had a major hurricane come through which pushed everything back a few months. So by the time we got it renovated and staged and got it ready to rent out, it was a horrible time of year. We thought we were going to struggle a lot.
We listed our property on Airbnb on November 10th, 2018. Our first booking was on November 16th. We ended up doing $1250 in rent those 14 days in November. And then in December, we did $2500, which is a little over our mortgage payment.
And we continue to grow that every month.
We haven’t made a mortgage payment out of pocket since this December. All the money from our rental just goes into a bank account and then the mortgage gets auto drafted out.
The last couple of months, that bank account has grown by about $1400 a month.
With our current bookings through the summer, we’re going to be doing $8000 to $8500 a month in gross rent per month.
A big reason investors are hesitant to get into short-term rentals is the seasonality. How does this impact your rentals in Carolina Beach?
In general, Carolina Beach has high seasonality. On average, it gets 19% occupancy in the winter, and 90%-95% occupancy in the summer. What we’ve been able to show is that if you’re really a top performer, you can beat that seasonality.
We were able to get, on average, 81% occupancy from November 16th, 2018 straight through the end of this current season.
How were you able to buck the trend and get such high occupancy rates?
First, people do still travel to Carolina Beach in the winter. There just aren’t nearly as many people as there are listings. So the demand is really low, and the supply is really high in the offseason.
But Airbnb has a feedback loop. If you treat people the right way, it doesn’t take very long at all for those five-star reviews to pile up. That translates to you ranking higher on Airbnb when people go to book a place.
The feedback loop allowed us to remain consistently booked. But you have to be a top performer.
Only the top 10%, top 25% rentals in our market have staying power. Everybody else kind of falls by the wayside.
Our prices do fluctuate according to the time of year. We reprice with the seasons, but as long as you keep the occupancy high you’re going to be making money year round.
How much time does it take to manage the rentals?
It’s not passive income. But most of the work is going into getting the property ready to go.
Once it’s ready and staged it becomes really really easy. From that point, you’re pretty much doing it from your home. So I’m on my phone usually five and 10 minutes a day adjusting pricing, and that’s about it.
The number one most important thing is your management software. There are a couple of good apps out there for communicating with guests. Guesty is pretty good but it was expensive.
The one that we’re using right now that we really like is called Your Porter. Your Porter gives us a unified platform so that we can look at one calendar for all our properties and across Airbnb, VRBO, Travelocity, HomeAway, etc. With it, you can automate pretty much anything you want to.
For example, anytime someone books a night, they’ll get an automated message from us. If anyone asks a question, you type up a really good response and save that in the software with the keywords from that question. Then, the next time someone asked that question, they just get that answer right away and it looks like it is from us directly.
We actually get really, really good five-star reviews based upon our communication and most people don’t know they’re not even talking to us. It’s just a bot that we set up.
Are you worried about an economic downturn dampening how often people vacation?
So in 2008, we saw that people still traveled and they still took their vacation time. They just did it domestically. And so if you have a family of five in Raleigh, North Carolina that used to fly down to the Bahamas every year and then 2008 happens, they still take time off. Instead of flying to the Bahamas, they’re driving to the beach.
So it actually helps domestic travel increase. So I’m not really worried about in terms of an economic downturn
Some people are nervous about putting all their eggs in the Airbnb basket. How do you feel about this?
Airbnb doesn’t have a long proven track record. However, I think that that’s an advantage because this is a positive negative feedback loop. It means that whoever gets in first and establishes those strong five star rentals.
Even though there’s going to be more inventory on the market it’s going to be those top performers that are able to maintain a strategic advantage.
When I’ve got 195 five-star reviews on my property, you can come in next to me and have even better staging, but I’ll still have more business than you.
It gives us the ability to leverage technology and really create a niche for ourselves in the market. Because right now everyone has a smartphone in their pocket. You’ve seen this technology trend go from the west coast to the east coast, from the north to the south.
I’m in the Southeast here. We’re kind of slow adopters of new technology, but if you look at the trend, there are more and more users constantly using Airbnb.
Some cities are banning Airbnb or, at least, heavily regulating it. Do you view regulation as a risk?
We’re seeing different areas start to kick up with different legislation.
Typically the reason you have to worry about legislation is the hotel lobby tries to squash short term rentals. And so regulators try to put their foot down in places where you have a strong hotel lobby. But there are plenty of markets out there that are perfect for this type of investing.
One of the things that I look for specifically is an area that’s going to start taking a tax on short term rentals. And I love paying that tax, which sounds counterintuitive. I don’t have a problem writing that check at all because it’s going right back into our community.
When you see a community that starts taking tax revenue and using that revenue, and everything is getting nicer because of it, then you know short-term rentals aren’t going away.
Also, if you made it illegal in some of these places, you would have a big drop in real estate prices.
Do you invest solely in short-term rentals now?
Yes, I’m selling my long-term rentals off one by one. I can put so much more velocity in short-term rentals here because when I’m generating three, four, eight thousand dollars in cash flow per month.
On my triplex, we’ll do $175,000 in gross rent this year, and my debt service is $36,000. I get tremendous cash flow.
I also get really strong equity pay down so I’m building value that way. On top of that, because we’re in a vacation market and its coastal area, it’ll likely appreciate.
Now, I don’t believe in investing for appreciation because I think it’s speculation. However, I think we’ll all agree that 10 to 20 years not beach houses are probably going to be worth more than they are now.
So I’ve got an investment that has cash flow equity pay down and appreciation all in one. I haven’t found any other investment when I can get those three things.
How have rentals helped you achieve financial independence?
Right now I love my job and I want to keep doing my job but we’re going to be generating six figures in income just from our side gig. And that’s really hard to do with any other type of investment that doesn’t have the same margins as short term rentals.
What’s next for you guys?
We’ve got two other triplexes that we’re working on. One is completely up and running and it’s crushing it. And then the other one, we are finishing renovations right now. We just had the first unit hit the market and we already have $2500.
What advice would you give someone who is interested in getting started with short-term rentals?
I would say that there are always horror stories out there and that’s what everybody hears about. But everyone who talks about a horrible experience, it’s usually not something that happened to them. It’s usually something that they heard or read about.
What I’ve found is that it’s really about the execution. A lot of people that say they want to do this. And then there’s a lot of people that don’t want to do it or they’re scared of and have excuses like, “I don’t want strangers in my house,” or “I don’t want things getting trashed,” etc.
The reality is, we have vacation properties that are beter taken care of than long term rentals. Plus, we’re making four to six times the cash flow in areas that are going to appreciate. And it just works.
Not because we’re doing anything genius. It’s just because we use data to know what works and then we follow a winning formula and we treat people with respect and so far they’ve done the same thing with us.
There certainly is risk, but what I would recommend just looking at the data and letting the data speak for itself.
You can find some of Clint’s rentals on his Airbnb host page.