Starting out in real estate (passive long term vs short term)

[Jacob Fafard]

Hi guys first post in the forums, forgive any naivete. I'm twenty eight currently working as chef who "likes" but doesn't love what I do. After listening to almost all of the forums I'm quite convinced this is what I want to do in some capacity. I have 8 years experience working construction for my father's construction company. I understand the building/contractor side but lack some in the business aspects. My question is are there any professionals out there who can give me their perspective on a newbie starting out in short term rentals IE(VRBO and Airbnb). 

I've got a decent understanding on how long term (passive/semi-passive) rentals work, however I want to transition into the real estate industry full time and feel as if short term rentals will create a better platform for a business. 

My idea is to start with one property, maybe even a tiny home. Once I've gained knowledge of overall management, price optimization, systems for high turn over and overall understanding of this "niche" part of real estate; I want to scale the concept to other properties and also manage other short term rentals. That being said I understand that the short term rental market right now has a lot of grey areas. There is always the risk that that area could change regulations and take away the business in a second. Meaning all properties purchased must cash flow as long term rental as a backup. Do you think tiny homes being portable hedge my risk? Should I stick to homes, with the possibility of a rentable ADU or condos?

I understand its a lot bottled up in one question but would greatly appreciate any and all's advice regarding the matter. 

[Ethan Cooke]

@Jacob Fafard - I get referrals every month for new arbitrage rentals from the landlords I work with. Before I had a network of landlord-partners, I used Craigslist to find properties. I look for a few basic things which I have found make a unit profitable:

- good neighborhood 

- Close to large employers with well-paying jobs

- easy parking

- below-market rent

- low cost per bedroom

- flexible landlord who will allow 2 people per bedroom plus 1-2 more and will allow small pets (ideally).

Places that meet these criteria generally cash flow very well.

Regarding arrangements with landlords, they love it and bring me their vacant units. When I first speak to them, I tell them:

- I’d like to use their place for furnished corporate rentals of 30+ days

- I will furnish it beautifully and maintain it immaculately  since that’s what corporate tenants expect. 

- the tenants are responsible professionals

- I will be 100% responsible for all the lease terms

- I will handle all property repairs that take less than $200 and 2 hours of my time

It’s free property management for the landlords. They don’t care how much money I am making since we both get what we want: they get to enjoy a completely passive, hassle-free investment and I get to make money by fixing up their place, furnishing it nicely and managing an ongoing stream of traveling tenants.