Okay, full disclosure. My friend Z is one of the authors of this book (30-Day Stay: A Real Estate Investor’s Guide to Mastering the Medium-Term Rental) and I’m giving it a glowing review. But that’s because it’s good and useful and not just because I adore her.
If you’re looking to invest in property, specifically medium-term rentals, this is the book for you. A medium-term rental is one that’s rented for 30 days or more. There’s so much lingo to learn and the authors lay it all out for you. They go through how to finance a deal, how to evaluate a deal, how to furnish a rental, how to find a cleaner. I could go on and on. There’s so much practical information in this book.
The authors mention wanting to earn more than 7% return on their investment because that’s what you get in the stock market. 7% is lazy money. They want 26%+ cash-on-cash return! 26 or more!
Boyfriend does medium-term rentals, so I used many of the tips. The authors have had a lot of success renting to traveling nurses. Our units are a little too expensive for nurses, we’ve found. Our guests are people looking to move to Denver permanently and need a home base to house hunt or digital nomads who like to explore and can work from anywhere.
The authors give you broad brush strokes, like who you should have on your team, to very specific suggestions like what you should include in each person’s medium-term rental starter kit. I took a lot of notes.
They go through different loan types and creative ways to get financing.
Here is where I may be the wuss. One of the ways to scale up quickly is to use your property as leverage to obtain more properties. You don’t really pay down the mortgages as fast as you can (as would be my instinct), but rather, you use that cash to buy more properties. You put as little down as possible to grow your empire.
Debt makes me anxious. I know mathematically it makes sense if the interest rate is lower than the rate of return from your investment, but I hate owing people money.
The authors care more about cash flow. I don’t have any cash flow, so this sounds appealing. Appealing enough to at least attempt to qualm my fears
Appreciation does not pay your bills month to month; appreciation builds wealth.
Here’s the thing. Do I want more money? This is a conversation I’ve been having with boyfriend. He says he is too young to retire. I have trouble thinking big. I’m content with enough. I already have enough and am risk-averse, so the idea of taking on a bunch of mortgages and leveraging debt to get more debt sounds really scary to me.
And, ya know, I don’t know what I would do with the extra money if I received an astonishing 26% return on my investment. Stay in nicer places when I travel? Fly business class? Donate a bunch to charity?
Yes, okay, I would. But is it worth the added stress?
Boyfriend only has five medium-term rentals and it’s a lot. I enjoy helping him with the logistics and coordination of it all, but it’s still work. Do I want more work? The authors brilliantly lay out the ways you can automate a lot of it, so that helps, but I still fret every time there’s a vacancy. Maybe that goes away with time and volume, but maybe it doesn’t.
We had a tenant earlier this summer who had a mental health episode and flooded the bathroom in his unit, destroyed furniture, and sprayed sticky substances all over the walls. It took us thousands of dollars and many hours fixing it. We spent and asked Airbnb for $8,000 and they gave us $1300. It doesn’t even cover the rent that the tenant didn’t pay.
Stressful!
Anyway, I’m just talking. I really recommend this book if you’re thinking of investing in real estate. It’s filled with personal anecdotes that make the book a breeze to read and they give a lot of lists, which I appreciate.
I’ve just been so anti-real estate for so long, I have trouble making the flip in my head. I’ve never been the type to browse through houses dreaming of what to buy. It also requires a certain hustle mentality I’m not sure I have. But I want to have it.
I don’t know. What do you think?
I wouldn’t do it! Sure, of course you could use more money, but would it make your life better?
At the same time, I can see the appeal of not wanting to “retire”, but there are surely less stressful ways of doing that.
Appreciate the feedback!
I don’t want the stress and the current landscape for real estate seems too pricey, add in RE isn’t liquid and I’m staying the course of stock market and bonds.
What’s your bond percentage?
If you’re content and have enough then there’s no need to hustle and have more stress. However if a person hasn’t reached their goals yet I think this is a perfectly legit way to increase one’s wealth.
Good take!
We may be uncommon, and we are not alone. Thank you for bringing up questions I often confront: “Do I want more… money, work, headaches, stress?” And “how much money do I need?” I am content, and I try to remember that time is money. Imagine a world where more people are satisfied with what they have. Contentment brings peace of mind. “Enough” can facilitate growth and self-improvement. I am blessed and grateful. ( Note to self: meditate on this.) I say leave the stress and work to someone else.
Love the thoughtful comment. Thank you!
I feel like I’m in the same boat. Though I’m FI and mostly retired, I’m constantly tempted to get into real estate even though 1. I don’t want the extra hassle/stress/anxiety 2. I’d be risking my current investments which provide enough so I could possibly have even more that I don’t need.
It seems like you feel the same way, and I’ve noticed this a bunch in the FI community. I think there are at least two contributing reasons we fall into this trap:
A. Scarcity mindset. Yeah, sure, we’re all supposed to embrace abundance and whatnot, but our wiring and our culture are constantly opposed to this. So we get a lot of pressure to constantly want more even though we’re good.
B. Mimetic desire: humans want what other humans want, and in the FI space the real estate peeps are generally super excited about real estate (good for them!). I think that level of excitement it necessary to maintain motivation to balance out the additional work, and it’s exciting to contemplate possible higher returns. But since we’re social creatures and other people’s desires run off on us, we start to want what this excited real estaters want. Highly recommended Luke Burgis’ “Wanting”, which really explains this human tendency well.
Compare real estater excitement to the chill boredom of index funds, and it makes sense why we’re drawn to what seems comparatively shiny that all the cool kids are doing.
I’m sure there’s other factors in play, but I haven’t figured them out yet.
So what to do with all this? In my case, it’s helpful if I know why I’m pulled to something even if I don’t actually want it when I sit down and get real. Like understanding how sugar works to make us want more, even though I’d rather not be fat and feel like crap.
Same with real estate. I know why I’m pulled to it, so I’m less likely to sacrifice what I really like for what others have.
Wow, that was a long comment. Hope it helped! Also, glad the book was good. I think maybe some people’s base setting/personality type/spirit animal? is better suited to RE investing, and I bet this book will help them.
Thanks for the fleshed-out comment! I really enjoyed reading it. I just ordered the book from the library (in Spanish because that’s the only version they had. I think it’ll be a fun challenge!)
Couples always cross pollinate to some degree but it’s important to respect each other’s individuality. Just because your boyfriend loves actively managing real estate doesn’t mean you should, especially since you already won the money game, it makes you uncomfortable, it’s a lot of work, and you don’t need the additional income. Also, on a $/hr basis, couldn’t you make way more doing legal consulting? Just some food for thought.
That said, I agree that real estate investing is an excellent way to diversify your portfolio as a shock absorber for the stock market, and I needed some reliable income to pay the bills, so I invested in Fundrise. No tenants, no toilets, professional management. It has paid 8.7% return on dividends not 26%, but for set it and forget it, especially through the pandemic, that’s pretty damn good.
Thanks for commenting! I’ve put Fundrise of my list of things to check out. 🙂
I do not like risk, I do not like debt, especially if it is associated with an unpredictable industry. Real estate can be great, but not always. I have one friend who went bankrupt back in the 80s when real estate prices crashed (Houston). It destroyed him and his family, Personally, besides not liking debt/risk, I could not handle the stress of vacancies, bad renters, house repairs and taxes, etc. I think it takes a certain personality to do real estate investment to the level you discuss. I know I am not in that group. I love your way of thinking. Think of me as your Grandma (79), who is still investing in good dividend stocks. Great passive income.
Great insight! Thank you for commenting. 🙂
Sounds stressful. I’d rather let VTSAX work for me!
I’m thinking the same!
listen to your gut.. shift to legal consulting if the goal is to make more money.. real estate is way too risky and stressful right now.
I’m listening!
I sold my rental property in 2020 and am glad I did. It was stressful, but the cash flow was nice. I just didn’t enjoy managing it.
Thanks for the point of view!
I owned/managed rentals from 2008-present which greatly accelerated my FI journey (quit my job 5 years ago). It’s true that you can get annual double digit returns + cash flow + triple digit appreciation over the years + gain so many cool renovation skills BUT.. I moved to a much sunnier place and left the rentals to a management company. The monthly returns decreased while property taxes increased. You kind of have to manage the property managers and get stressed when there are vacancies/large repairs. You increase your overall liability and it’s difficult to know if you’re buying high. I decided to sell everything and go into boring old index funds this year and so glad I did. I just want to watch numbers in a computer grow instead of worrying about leaky roofs and pet stains.
Appreciate your perspective! It resonated greatly with me.
Have you thought of starting a Substack? There have been a few articles recently about earning an income from it – much more fun than managing rentals 🙂
I’ve not heard of Substack before. I’ll look into it! Thanks for the suggestion.
You should go for it! Try investing in real estate.
So far, you’re the lone voice in favor. Thanks for commenting! 🙂
Pingback: Brightside - Escaping Avalon
This is a great post! Does he only have medium term rentals, or does he do STR and long term rentals as well?
Diversification can be a great strategy. If MTR are too much, you can rely more on the long term strategy.
We have one short-term rental (the house we live in and rent out when we travel)