EP 424: AirBnB Subleasing: How Jorge Makes Six Figures Automating Short Term Rentals w/ Jorge Contreras

00:00:00:00 – 00:00:19:00

Jorge Contreras

Most people need like 2 to 4 Airbnbs to replace 95, and most people don’t have money to go and buy 2 to 4 properties right now. But with the same amount of money that you could buy one, you could sublease like four or five properties and replace your 9 to 5. So again, number one, you know, verify the regulation.

00:00:19:00 – 00:00:37:06

Jorge Contreras

Just you don’t want to you don’t want your property or business to be short lived. So make sure you can get a permit. Run the comps on the rent advisor, pitch it as corporate housing and get permission in writing. And I say that because I’ve had a lot of people do me on Instagram and they’re like, Hey, the landlord just found out I’m getting evicted now.

00:00:37:06 – 00:00:54:23

Jorge Contreras

I got to shut down my business and like that sucks is like, Hey, you should have been upfront with the owner and just get permission in writing. So those are the three like most important things. When somebody wants to go into arbitration.

00:00:55:18 – 00:01:12:01

Brady Winder

Hey friends, welcome back to the Care CAS podcast. I’m your host, Brady Winder. This is the podcast where we help investors and agents build businesses of freedom and impact by dialing in your online marketing. And today I have with me Mr. Jorge Contreras. Welcome to the podcast where Hey, how are you?

00:01:12:01 – 00:01:16:21

Jorge Contreras

Mr. Brady I’m doing great. Truly an honor and a pleasure to be here. Thank you for the opportunity.

00:01:17:21 – 00:01:37:11

Brady Winder

Yeah, absolutely. MAN Everybody, this is going to be a really fun, good episode. So we’re going to be talking about Airbnbs, short term rentals today, and not just Airbnb’s, but a lot of you know here, a lot of investors just kind of go into Airbnbs without a lot of knowledge or insight that just we’re going to do this.

00:01:37:11 – 00:02:04:06

Brady Winder

We’re going to see if it works. And sometimes it doesn’t work. And it could have been prevented. It could have been done better. So I’m bringing George out of the podcast because he has been doing this more efficiently and effectively than anyone I’ve heard of in our industry. As far as arbitrage in Airbnb biz and automating them as far as systems and process, how to find your Airbnbs, how to make sure they’re profitable, how to find the right ones, and how to get into them with no money.

00:02:04:06 – 00:02:19:14

Brady Winder

So this is going to be a perfect episode if you’re just starting out a real estate or if you’re just wanting to start out an Airbnb is how to do it with lower risk than just buying a property and lessons use of the house hacking. So it’s going to be so yeah, it’s going to be a good conversation.

00:02:19:14 – 00:02:49:05

Brady Winder

Or is the Airbnb expert. And so yeah, we’re going to talk about it. But first before we get into it real quick, housekeeping. It’s SEO month at CARA. This episode has nothing to do with SEO, but we’ve put out a lot of great SEO content this month, so go to Care.com slash SEO to check that out. And then next month we’re going to be doing website design and conversion months or all about conversion of your website to make sure that you’re making the most of the leads that you’re generating and that you’re actually turning those leads into deals.

00:02:50:06 – 00:03:09:21

Brady Winder

But anyways, hooray. He runs a six figure Airbnb business focused on arbitrage and automation, like I said. But what I want to talk about first here is I got an email from you. You are getting mail from your system about coming on the podcast, went over your website and it was a video about your story and managed to pull it all of my heartstrings.

00:03:09:21 – 00:03:22:08

Brady Winder

It was it was so good for the people that haven’t watched the video or that don’t know you. Would you mind just giving us a glimpse into the upbringing of RJ and kind of what drives you like how you got to why you’re doing this thing today?

00:03:22:08 – 00:03:51:11

Jorge Contreras

Absolutely. So a lot of challenges in my upbringing, and I think it’s great to talk about this because often you see people on social media just showing like the result or the success, everything above the surface and you don’t get to hear a lot of the struggles, challenges and obstacles, which is how people can actually actually relate. And I think this will connect for anybody that is going through a chapter in their life where they’re experiencing challenges and they feel like they don’t see the light at the end of the tunnel, but definitely experience a lot of challenges.

00:03:51:11 – 00:04:12:08

Jorge Contreras

Growing up, I attended my Half Brothers funeral when I was five years old. He got he was murdered due to like gang related, you know, stuff. And when I was seven, I was selling drugs with my dad. When I was ten, we were smuggling people into this country. And also when I was seven, my dad was an alcoholic his entire life.

00:04:12:08 – 00:04:29:11

Jorge Contreras

And the doctor told him that if he wanted to see his youngest son or he to grow up, you needed to stop drinking alcohol. And he did. But the damage was too far and too much. So when I was 12, he passed away from alcohol, and then when I was 13, my mother abandoned me and I’m pretty much the youngest one.

00:04:29:11 – 00:04:55:22

Jorge Contreras

Out of all my brothers and sisters, everybody after me, even though they were only like 14 and 16, they were like pregnant. I already had kids. I’m the only one who graduated high school and I graduated with like four S and one D dropped out of college. I did seventh grade twice. So and then a lot of the friends that I grew up with, like in junior high and early high school, they ended up like in debt, like dead in jail or just really messed up from like drugs and alcohol.

00:04:57:07 – 00:05:18:07

Brady Winder

See, that is that is a, well, one, I commend you on your storytelling ability because that’s a lot to back into about 60 seconds to I commend you and you like that you are resilient, man. It’s crazy to see where you are now. Yeah. Especially out of all your siblings and your families and friends. What would you what would you attribute, you know, to your success?

00:05:18:07 – 00:05:22:07

Brady Winder

Like, what was what was the one thing that kept you going through that crazy upbringing?

00:05:22:18 – 00:05:40:11

Jorge Contreras

Yeah. So I would say what kept me going is I didn’t have anything to fall back on. So even when I was like when I was 16, I was completely living on my own. After my mom abandoned me, her friend took me and she said, Hey, as long as you go to school, she said, I’ll feed you clothed you, and put a roof over your head.

00:05:40:11 – 00:05:59:10

Jorge Contreras

And that was the deal. And then when I was 16, she said, Hey, I’ve helped you enough. Now you got to look after yourself. I got my first job making minimum wage. I was paying $300 a month renting a room. And I just remember if I wanted to take a girl out on a date or just do anything, go out to a restaurant, like there was nobody there that I could go and ask for money.

00:05:59:10 – 00:06:18:03

Jorge Contreras

So just there was no safety net. There was no Plan B, I was like, this is going to work because it’s going to work. Like it just put me in survival. Like I didn’t have an option. So that that was a blessing in disguise. But what really helped me is that I had to change the meaning that I had to give in to my story.

00:06:18:03 – 00:06:35:03

Jorge Contreras

But because up until I was like 16, I always was a victim to my story. I’m like, I’m never going to be successful. I’m never going to amount to anything because that’s what all my teachers told me, because I always had bad grades. I wasn’t I didn’t have great attended to in school. And so I just believe what they were what they were telling me.

00:06:35:15 – 00:06:57:10

Jorge Contreras

And I just didn’t see the light at the end of the tunnel. And I thought that life was just happening to me rather than for me. And so of course, as I started getting older, I started going through going to a lot of self-development trainings, a lot of did a lot of mindset work, a lot of therapy. And then I realized that all of these things actually happened for me and not to me.

00:06:57:10 – 00:07:13:23

Jorge Contreras

So as I saw that at a young age, you know, being at my brother’s funeral and then being in like gangs, it was like, okay, well, I don’t I don’t surround myself with other gang members. And then growing up, my dad was like in and out of jail for doing illegal businesses. It was like, okay, well, don’t do anything illegal.

00:07:13:23 – 00:07:33:06

Jorge Contreras

Just do what’s right. And then like, he would like, cheat on my mom. And that was normal. And that we saw how much that impacted our life as kids, just everything that she went through. So that taught me the value in, you know, being loyal and just focusing on. So everything that I experienced, it was like, don’t do that, don’t do that, don’t do that.

00:07:33:06 – 00:07:52:02

Jorge Contreras

So even today, I’m 35, like, I don’t smoke, I don’t drink, I don’t cheat on my wife, I don’t do anything illegal. And so it just pointed me in the direction of do the opposite of what your dad did. And they became like the biggest blessing to just change the meaning that I that I had previously given to all those stories.

00:07:52:02 – 00:08:08:12

Jorge Contreras

I think that people everyone that’s been to be there challenges, obstacles, tribulations. If we change the meaning of our story and and of our past and realize that all of that happened for us and not to us, it’s a game changer. It takes you from being a victim to your story to feeling empowered.

00:08:09:12 – 00:08:26:03

Brady Winder

Yeah, absolutely. I’m a you know, I’m a firm believer in that, too. Like, the things happen for you instead of you, because otherwise you wouldn’t have the opportunity to share your story with other people and encourage them and help them as well. You wouldn’t be here on this podcast talking about that. Oh, one more question and we’ll dive into the stuff people tune into the podcast for in the first place.

00:08:26:03 – 00:08:34:13

Brady Winder

But I love talking to others. Did did some of that change or some of that motivation drive, did that intensify when you had kids because you have at least one kid?

00:08:34:13 – 00:08:37:12

Jorge Contreras

I have to I have a three year old daughter and a six month old daughter.

00:08:38:07 – 00:08:47:06

Brady Winder

Oh, wow. That’s awesome. Did that. You know, so growing up, your dad was not the dad that you wanted to be. Did that really light a fire?

00:08:47:06 – 00:09:12:16

Jorge Contreras

Oh, yeah, totally. And that’s exactly what I always said is my goal is to be the father that I didn’t get to have, you know, So for sure, Like, then I think about it, you know, when I travel to, like, conferences or if I’m not here for three days from time to time, I think about that. And it’s always a reminder of my dad was in prison, like he was present for us partially, but he had kids with two other women and he was never present for them.

00:09:12:16 – 00:09:35:01

Jorge Contreras

Like when he died. I think he owed over $200,000 in child support. And this is like the nineties. So it’s probably like close to a million with inflation adjusted and they like, never got to see my dad. And so I still to this day right they’re all in their forties and I still see to this day how much their lives continue to be impacted by not having the father figure.

00:09:36:01 – 00:09:44:20

Jorge Contreras

So it’s just crazy how much your life can be impacted by not having a father figure. But even more important, the meaning that you give it.

00:09:46:02 – 00:10:05:21

Brady Winder

That’s awesome. That’s really cool, man. Thanks for sharing. I can relate to, you know, my son, he is eight and like that, that drive, that motivation that comes from that, it’s a blessing for sure. Anyways, we’ll get into the Airbnb side. Thanks for, you know, thanks for having that conversation. It’s really important. Like Carrot’s mission is to build is to help our members build businesses of freedom and impact.

00:10:06:04 – 00:10:26:09

Brady Winder

And so, you know, as we’re I feel like it’s 100% applicable to the conversation around Airbnb is is courses like this can help you buy back some time freedom you know so that you can have a bigger impact and you can spend more time with your family. You know, that freedom and impact. And so you’re going to live and breathe in the example of how you’ve done this and bought more time back in your business.

00:10:26:19 – 00:10:40:14

Brady Winder

So anyways, getting into so you run Airbnb, you’re the Airbnb guy. I’m curious, what is your what’s your business model look like now versus when you started out? Get into Airbnb.

00:10:40:14 – 00:11:02:10

Jorge Contreras

It’s so when I started investing, that was back in 2012, actually just posted Thursdays and I like to post throwback Thursday all my stories and have a picture with my best friend who today is actually my property manager. His name’s Ron and it’s his birthday. So I found a picture where it’s like me and him standing in front of my very first house that I closed on May 23rd of 2012.

00:11:02:10 – 00:11:22:18

Jorge Contreras

So could I ask you that? That’s sweet. So when I started back then, I was doing like house hacking and I wanted to just not have to pay the money out of pocket. So I got this house back then. 2012, four bedroom I lived in, the master, rented the other three rooms, which paid not only the principal and just taxes and insurance, but also the utilities.

00:11:23:01 – 00:11:46:08

Jorge Contreras

But I always saved those 1800 dollars a month that I didn’t have to pay. And two years later, at $43,200 from saving those 1800 a month. And I took that. And rather than buying a mercedes or a nice car or going on vacation, I did my first new construction project in the back yard in 2014, and then that started to rent to a long term tenant for a thousand a month.

00:11:46:08 – 00:11:52:19

Jorge Contreras

So here I am 2014 living mortgage payment free and making $1,000 a month in the back unit.

00:11:53:05 – 00:11:56:22

Brady Winder

And if you build 80 you that you put in the back of that, you’re okay.

00:11:57:02 – 00:12:17:03

Jorge Contreras

So it was actually a recreational room back then. The 80 you law in California didn’t pass until January of 2017. So in 2014, even though my property was zoned for to have two units to be a duplex, I didn’t have the lot requirement. So they said, Hey, you cannot have a second unit with the kitchen. And I’m like, Well, what can I do?

00:12:17:03 – 00:12:33:05

Jorge Contreras

Because I’ve always been a big believer in do what you can with what you have where you are. They said, Well, you can do a rec room. I’m like, What’s a rec room? They’re like, Well, it’s like a room that you could use as a recreational room. You could use it for an office or an extra room, but you can have a kitchen or a shower.

00:12:33:05 – 00:12:54:17

Jorge Contreras

You could have a toilet. So I’m like, Oh, okay. So I talked to my contractor. I said, Hey, we’re going to turn this into an 80, you or just another unit? Yeah, I don’t think I knew what the term was back then. And so he did that. We designed it in a way where after all the inspections and everything, fine inspection pass, we added a shower, we added a kitchen and boom, I started renting it for a thousand.

00:12:54:23 – 00:13:18:08

Jorge Contreras

Perfect. Yeah, powerful things. So the lesson there is that growing up and I’m sure you heard this growing up, people always told me that money didn’t grow on trees and I had this belief that money was hard to make. It was hard to come by because of that, you know, hearing that growing up. But I realized in that moment because after I rented a unit for a thousand a month, it was like a 40% ROI.

00:13:18:08 – 00:13:44:21

Jorge Contreras

So in two and a half years later, after building it and renting it out, I got my $30,000 back and so now I got my money back. I’m still making a thousand from the back now in net profit and I’m still living mortgage payment free. And I realize that money does grow on trees. If you learn how to plant money, seeds and I learned at that point that everyone who told me that money didn’t grow on trees were simply projecting their limiting beliefs and lack of result on me.

00:13:46:00 – 00:13:56:05

Brady Winder

Yeah, that’s cool. That’s awesome, man. So you got that first property you built the, you know, in the back. And so now so when you got into Airbnbs, what did that like?

00:13:56:05 – 00:14:16:21

Jorge Contreras

Sure. So my first business that I used to be a professional dancer and at the time had a choreography company and one of my dancers who was a performer in 2016, she owned two duplexes in Fresno, California. Her name is Nicole, and she mentioned to me that she was making three and a half times on Airbnb compared to what she was making with like fair market rents.

00:14:17:06 – 00:14:36:02

Jorge Contreras

And I thought that was crazy. I’m like, I got to look into this. So there was very little information back then online, like in 2016 about short term rentals. I tried to consume everything I possibly could. I had a few leases in 2017. I at that point, I had I had three houses for a total of like six units, right?

00:14:36:08 – 00:15:00:20

Jorge Contreras

So like I lived in one, my mom lived in one, I bought her a house and then I had four units that were all long term. So I put all four of those units on Airbnb in March of 2017. So it’s going to be six years pretty soon. And I went from making 1500 in gross rent per unit to 3500 in gross rents from six K to 14 K, And I was like, What is going on here?

00:15:01:12 – 00:15:07:19

Brady Winder

It’s so and how, how many? No, I don’t want to throw you off. I’m just curious for context, how many days out of the month were they booked?

00:15:08:12 – 00:15:29:09

Jorge Contreras

I would say probably about 22 days. Like about like just under 70% occupancy in all of these units at the time were like two bedrooms and one bath. And I was hosting like about six people on average. And I think on one of them I pushed it up to eight. But I told them in the description, Hey, I know it’s a lot of people, but if you want to save some money, it’s a great place.

00:15:29:09 – 00:15:50:19

Jorge Contreras

And if you guys can power in one restroom, you guys can make it work. It’ll be great. Yeah. So, yeah, that’s what I did. And you know, these properties were all in Southern California. So, you know, we have they were in somewhat proximity to like universal Studios, Disneyland near downtown L.A. for a two of the units. So they were in great locations and, and they did really well.

00:15:51:03 – 00:16:10:15

Jorge Contreras

And then I and then my next goal was I wanted to scale faster because at the time in 2018, I wanted to replace my my wife’s 95. She was a law enforcement officer. We wanted to start building a family, but in her government job say her shift was going to be done in 15 minutes. They would say, Hey, Lucia, you have to stay for another 8 hours.

00:16:10:15 – 00:16:24:03

Jorge Contreras

And there was nothing she could do. And so we knew that that was not going to work out. I would always joke that I would be with our kids at Disneyland where she would have to work. And I’m like, I got to do something about this. So my goal be get more cash flow and replace her 9 to 5.

00:16:24:11 – 00:16:49:02

Jorge Contreras

And I didn’t have the capital to keep buying more properties like every few months. And so I came across this arbitrage strategy and I’m like, okay, so I can rent properties from owners, get permission in writing in the lease agreements, because in our lease agreements it says no subleasing. But I was like, Well, what if I talk to them and actually get the permission and I just let them know, hey, I got strong financial, strong credits, you know, I’m going to be responsible.

00:16:49:02 – 00:17:07:17

Jorge Contreras

I’ll set up the property and autopay if there’s any repairs or damages, I’ll put in the lease and I’m going to be responsible. And so in in early 2019, my business partner Jaime, and I went and we launched like seven subleases and that was I was able to replace her 9 to 5 and even it was strictly a cash flow play, right?

00:17:07:17 – 00:17:31:16

Jorge Contreras

We didn’t have the equity or the appreciation. Couldn’t do bonus depreciation with cost segregation from owning the real estate. But at the time that was not important to me. I’m like, I need cash flow to replace my wife’s 9 to 5 and that’s what did it. And then what’s cool is only having all those subleases actually helped me, you know, compound, compound my savings and grow my savings so I can then go and buy a ton of real estate.

00:17:31:16 – 00:17:37:08

Jorge Contreras

And now I have a portfolio of like close to $8 million in like single family homes that are all on there.

00:17:37:19 – 00:17:55:02

Brady Winder

So that’s crazy. So the first objection that pops up in my head, as he said, I heard this arbitrage model. We did seven of them. The first thing that pops up for me is most landlords wouldn’t have a reason to say yes, right? How many out of the ones you ask are saying yes and how do you get in house?

00:17:55:06 – 00:18:17:01

Jorge Contreras

That’s a great question. It’s going to be a numbers game. So we get about 25 to 30% of landlords that say yes, and I’ve never done I’ve never done flips or wholesale myself, but I have some, you know, some really close friends that do and they shoot out like a ton of offers and they’re like, Yeah, man, we look at 100 properties and from there we submitted so from 100 properties that they look at, they say they closed on like one, right?

00:18:17:01 – 00:18:36:12

Jorge Contreras

So it’s a numbers game, whether you’re flipping wholesaling, even if you’re a loan officer or real estate agent. Like it’s, it’s always going to be a numbers game, right? And so with our Airbnb arbitrage, about 25 to 30% of landlords say yes, and you get everything in between from people that are completely open to it, to people that hang up on you and say, Don’t ever call me.

00:18:36:12 – 00:18:57:01

Jorge Contreras

And then everything in between. But one of the things that really helps us and I think this will help the audience is we don’t say, Hey, we want to rate your property and do Airbnb because the landlord is going to think that it’s going to be a party house. Right. We’ve all heard heard on the news once or twice about this crazy party that took place.

00:18:57:12 – 00:19:24:10

Jorge Contreras

And fortunately, these landlords probably came across one of those videos and now they think that’s what you want to do in their property. So we always pitch it as corporate housing because we want we want them to understand that we truly only work with professionals that are coming to the property. That could be a family, it could be a legitimate company, it could be nurses traveling for work, relocation companies, government bookings or or air works or nurses traveling for work.

00:19:24:10 – 00:19:32:00

Jorge Contreras

But we don’t allow any parties or any events. Even if somebody wants to do like, you know, just anything.

00:19:32:14 – 00:19:32:18

Brady Winder

And.

00:19:33:01 – 00:19:45:16

Jorge Contreras

Just nothing with music. And we don’t allow people other than those on the reservation. So we really only do work with professionals. So when we pitch it as corporate housing, they’re a lot more receptive to the idea.

00:19:46:20 – 00:20:08:00

Brady Winder

Interesting. That’s, you know, honestly, you know, I’m familiar with the numbers in regards to wholesaling. And so those are much better numbers than I would have thought, like 25%. That’s admirable. And I love how you, you know, you pitch it as that, not only pictures of that, but that’s what the business model is. It’s an and, you know, I was going to ask about lowering risk and it sounds like that’s one of the ways you do lower risk is having those strict standards on your Airbnb.

00:20:08:00 – 00:20:11:06

Brady Winder

Right. As opposed to, hey, we got an Airbnb. Come on. Come on.

00:20:11:07 – 00:20:12:06

Jorge Contreras

Yeah, exactly.

00:20:13:13 – 00:20:17:14

Brady Winder

So what are the you know, what are the splits like between you and the landlord?

00:20:17:16 – 00:20:48:00

Jorge Contreras

Yeah. So typically what we do is we pay them the fair market rent. So if, if their property is being advertised for, say, 3000 a month on Zillow, that’s exactly what we pay personally, I’ve never paid more than what they’re asking for, only because in real estate we always want to have multiple exit strategies. And so when I first started, I used to launch Airbnbs in a lot of gray areas where Airbnb is where they weren’t they weren’t issuing permits, but they also like weren’t illegal.

00:20:48:00 – 00:21:17:13

Jorge Contreras

And I got caught with my pants down one time where I launched an Airbnb and again it was a gray area and six months into the lease they implemented a regulation that no longer allowed me to operate like one day to the next. And so what I did is I put it as a long term rental on Zillow and I got a tenant for 12 months who was paying $500 more than what I got the lease for, and mainly because I had furnished it, right.

00:21:17:13 – 00:21:39:01

Jorge Contreras

So we put like 15 grand in like furniture. And the crazy part that that was at the beginning of the pandemic. So we’re coming up on almost, almost three years of making $500 a month from a long term tenant. So that so when I got to experience that, it was like and again, that’s another example of, hey, things don’t happen to me.

00:21:39:01 – 00:22:07:08

Jorge Contreras

They happen for me, right? Who wouldn’t like make $500 a month in that cash flow from a property you don’t own without doing Airbnb rights? And so for that reason I only and ever I was only want to pay fair market ran because I need to have that as like a backup strategy in case anything ever happened. So I always pay from fair market rents if I’m paying them 3000 a month and then I’m making say 6000 a month, of course after I pay for utilities, cleanings replenish bills.

00:22:07:16 – 00:22:28:02

Jorge Contreras

My goal is to make about 2000 a month in that cash flow per property. That said, we only go for properties in primary locations that are near theme parks to beach downtown. All of my properties have pools, Jacuzzis and the game room and we host 8 to 12 people, which allows us to charge a higher nightly rate and have a higher profit margin.

00:22:29:02 – 00:22:51:12

Brady Winder

MM So you’re only going after those larger groups that make sense. Yeah. Okay. So you’re paying the landlord around 3000 and then you said the 2000. That’s your, that’s your net net cash flow. Okay. Gotcha. Okay. So that makes sense. I’m curious about some of the automation. So how many Airbnbs do you personally have right now?

00:22:51:12 – 00:22:56:16

Jorge Contreras

Yeah, we have 18, So we own eight, sublease seven and manage three.

00:22:56:16 – 00:23:01:12

Brady Winder

Okay, So what are you doing to streamline the process and kind of buy back some of your time?

00:23:01:12 – 00:23:21:08

Jorge Contreras

Absolutely. That’s a great question. The Street, there’s three operations in a short term rental business, right? Two of them, you need somebody in person and the third one is virtual. So the two in person is, of course, somebody to clean and someone to do maintenance. And I recommend to build an in-house team, which we’ll talk about in a second.

00:23:21:16 – 00:23:44:18

Jorge Contreras

But as far as the automation, I got the cleaner, the maintenance person, and then I got a virtual, you know, a virtual assistant in Mexico, only because I used to have Vas in the Philippines, but they were 15 hours ahead of Pacific Time and it was a challenge with the time zones. So by having somebody in Mexico, South America, Central America, the time zones are going to be very similar to like Pacific and Eastern and whatnot.

00:23:45:09 – 00:24:09:05

Jorge Contreras

And what I did is I created a Slack channel. So you got the workplace right, like the company name. And then each channel is a property. So we have 18 channels. And if I go in channel number one, people know that anything that we talk about pertains to that property. So I have the cleaner, the maintenance, the VA myself and the property manager and we are in all 18 channels and this way everybody communicates with each other.

00:24:09:05 – 00:24:29:08

Jorge Contreras

So the VA will come in here and be like, Hey, Claudia, somebody is asking if they can check in early, if they could check if they could drop off the luggage and they all just communicate with each other. And then, of course, whenever something more important needs to be done, that’s when my manager steps in and my manager’s like a really strong operator integrator.

00:24:30:04 – 00:24:47:06

Jorge Contreras

I can honestly delete the Airbnb app off of my phone like I am not involved. We don’t have weekly meetings. Like he just he’s just a doer and he’s he’s really good with that stuff. So that’s how I’ve systemize it. And this allows me again, to like work on the business and not be so involved in the business.

00:24:47:06 – 00:25:06:10

Jorge Contreras

And like right now I’m working on a couple developments and going into the multifamily value add stuff. And if I was like 18 properties is a lot of freaking work. If you’re doing it yourself and you know, I want to continue to grow my portfolio and go after bigger deals and not being involved here allows me to go and do other stuff.

00:25:07:13 – 00:25:22:18

Brady Winder

Absolutely. It’s scalable and I love just, you know, it’s funny. I mean, it’s like in and out of it every day. And I would have thought to, you know, do that with your properties like that, having a one slack channel per property. And that way you don’t have to worry about which which email thread was that was it this for that one reply.

00:25:22:18 – 00:25:24:13

Brady Winder

Like where is that conversation. Yeah.

00:25:24:23 – 00:25:41:04

Jorge Contreras

Yeah. Because in the beginning, in the beginning we were using WhatsApp but it was the same team for like three or four properties. And then that it’s exactly what you just said. They’re like, Oh, with property as is for if you just switch to Slack and now each property has its own channel and it’s all in there. One workplace.

00:25:41:04 – 00:25:44:19

Jorge Contreras

So it makes it super easy to, to handle communications there.

00:25:45:16 – 00:25:55:12

Brady Winder

Absolutely. So just clarify real quick for me, what is the VA doing or what’s the difference between what your VA is doing and then what your property manager? So I had.

00:25:55:12 – 00:26:16:04

Jorge Contreras

My VA focus on like those lower income, lower income activities that are tedious but necessary. So like, I don’t need a manager to answer, Hey, can we check in early? Can we check out Lee? Hey, can we get more time? So a lot of that tedious stuff. I have the VA. Do you know she will send in the check in procedures, check out procedure.

00:26:16:04 – 00:26:39:01

Jorge Contreras

She’ll remind them of the check out time. Just anything before, during and after. As far as communications. Now, let’s just say there’s an issue. Actually, just yesterday I was talking to my property manager and he was telling me that he found like a mice in one of the are like a rat in one of the units. So when it’s something like that, you know, like which is super rare.

00:26:39:01 – 00:26:54:18

Jorge Contreras

Right. But he goes in there, he steps in and he actually went to the property because he set up some traps. You know, when the guest checked out before the next guest checked their number, normally he would have called the professional, but he’s like, dude, they’re checking in like the same day and I want to catch this thing.

00:26:54:18 – 00:26:55:10

Jorge Contreras

So like, he just.

00:26:55:18 – 00:26:57:13

Brady Winder

Like, I don’t mind me and just getting the rats.

00:26:57:15 – 00:27:19:07

Jorge Contreras

And he went over there and just handled it right. And yeah, anything that requires someone in person, he’s very hands on because again, my VA is in Mexico. So that’s kind of how we split some of those roles and responsibilities. And together they work really well. And this way we also protect his time because if he was doing all the communications, I think he wouldn’t be able to handle the whole portfolio.

00:27:19:07 – 00:27:20:09

Jorge Contreras

It would just be a lot of work.

00:27:21:10 – 00:27:39:02

Brady Winder

Oh, yeah, absolutely not. It sounds like you’ve got, you know, those roles and responsibilities now then and separate as well. What do you what are you doing? So we talked a little bit about buying criteria. I mean, we could talk about that a little more. But you mentioned, you know, larger parties. They have to have a pool or hot tub.

00:27:39:02 – 00:27:41:17

Brady Winder

How are you finding these properties? Yeah, so.

00:27:41:17 – 00:28:03:13

Jorge Contreras

We find the properties in Zillow for for everything just makes it easier. Obviously, all the inventory is there. The only thing I don’t like about it is that the filters don’t work when you’re looking for properties with like pools or even the description. So that’s why a lot of times I’ll actually use like other platforms like Redfin, super easy, the filters work.

00:28:03:13 – 00:28:22:08

Jorge Contreras

There are 100% accurate. So I’ll go in there and I’ll type a city and I’ll put, Hey, three bedrooms, two baths, minimum 1100 square feet. It must have like a pool. And then and that’s about it. And then I start looking for everything and I focus on the acquisition. So I’ll look for it myself. I’ll find the property I like.

00:28:22:08 – 00:28:40:23

Jorge Contreras

I’ll talk to the landlord myself. Once we signed the lease, everything else is done by my team. So my team will put together a furniture list, so order the furniture, coordinate that everything goes in from. Once Amazon delivers, they’ll assemble the do the decor, be there with the photographer, they’ll create the listing for me. So they have the, you know, my log in and password.

00:28:41:07 – 00:28:52:20

Jorge Contreras

They’ll create the welcome books and they’re like, Here you go, here’s a listing. And then my manager obviously takes over management. So again, I can focus just on those high levels, which for me is acquisitions.

00:28:54:02 – 00:29:04:00

Brady Winder

In it sounds like I’m guessing you’ve got your systems and process your playbooks dialed in as far as this. You’re not you’re not just winging it and hoping that they can figure it out, but you’ve created systems for.

00:29:04:00 – 00:29:21:03

Jorge Contreras

Yeah, exactly. Like I have the same team that’s been launching all the, you know, for the last three years for me. So when we get a new property typically and one of like the same area, so it’s the same cleaners, the same maintenance people, the same, it just we just plug and play to the same system so it works Good.

00:29:21:05 – 00:29:28:17

Brady Winder

That’s awesome. That’s crazy. Efficient. Yeah. Anything else As far as buying criteria, you know, that we didn’t mention.

00:29:28:22 – 00:29:51:21

Jorge Contreras

As far as purchasing criteria, like purchasing the real estate. Yeah. Yeah. I mean, I guess for somebody that’s just getting started, like I’ve done this a couple of times where similar to when I bought my first property five years later, after that one in January of 2017, me and my wife won our first property together. And at the time, you know, we weren’t married yet, but we were engaged and we didn’t have kids.

00:29:52:06 – 00:30:13:12

Jorge Contreras

And we also wanted I wanted us to leverage the mortgage payments so it didn’t have to come out of our pockets. So same thing. We got a four bedroom property with two bathrooms and we did a split home. 80 you right? So we were able to close a hallway, open a door where there was no door. We converted one of the bedrooms into a kitchen.

00:30:13:12 – 00:30:44:22

Jorge Contreras

That’s living room. And so we kept the main living area, dining kitchen, the master bedroom, backyard, all that. And now we we got two rooms and the middle room was the kitchenette slash living room. And then it had the bathroom, but it was completely separate. It was like a duplex. And we started renting that out on Airbnb and we were able to set up to the bedrooms were fairly big, so we were able to fit in two queen beds in each bedroom and we were hosting up to eight people.

00:30:44:22 – 00:30:59:02

Jorge Contreras

I’m like, I know if I host more people, I can make more money. And again, most of the time it was like 4 to 6 people and sometimes people were like, Yeah, we want to save money. And they would be seven or eight people. They would always park in the street. I was like, Don’t park in a driveway.

00:30:59:08 – 00:31:23:19

Jorge Contreras

But for three and a half years of having that Airbnb there, we saved 3000 a month. So we saved over $100,000 in mortgage payments over the course of three years. And and again, I mentioned in this because if somebody out there wants to go on and buy a property with three and a half percent down, FHA or 5% conventional, do some house hacking, turn one unit into A or E live in the rest of the house.

00:31:24:14 – 00:31:48:03

Jorge Contreras

I know everyone’s largest monthly expenses where they live so you can get rid of a $3,000 mortgage payment. Man, that’s like a huge, huge, huge win, right? And then there’s 100,000. We rolled it over and then acquired more properties. Right? So that that could be one strategy for anyone. That’s looking to to buy and to buy with less money, to have more money to then buy more deals.

00:31:49:02 – 00:32:05:20

Brady Winder

Oh heck yeah, man. I’m a big proponent of instead of first looking at it is like, how much more money can I make? It’s like, how can I reduce my monthly expenses? First, How can I really get efficient every month, everything from cars to house to, you know, get rid of all the fluff and how can I make more money and that kind of thing?

00:32:06:20 – 00:32:22:22

Brady Winder

Yeah. Let’s talk about risk, if you don’t mind. So I know you know, people think about doing Airbnb and B, they’re like, Oh, well, especially where I’m at and more of a rural market, it’s a little different. But they’re like, Well, what if I can’t rent it all the time? How do I keep it full? And what I even make that much money?

00:32:23:17 – 00:32:44:14

Brady Winder

But there’s also risk of like seasonality, you know, depending on the market here. And there’s also a risk of like what laws and regulations are going to come down the pipeline, like you mentioned, you know, in the previous story. So what kind of risks do you face and what are you doing to kind of, you know, be ready to pivot those regulations?

00:32:44:23 – 00:33:06:13

Jorge Contreras

Yeah, one of the risks is regulation, right? I would stay away. And again, when I first started, I would again, there wasn’t as much regulation as there is today, but I see it as a blessing because today I only launch in areas where I can get a permit because in the past. Right. I learned from that experience where at six months into the lease they changed the regulation and then I couldn’t operate.

00:33:06:13 – 00:33:26:10

Jorge Contreras

And then it was like, okay, I don’t want to keep building businesses, investing time, money and resources to something that is going to be short lived. So a risk is launching in areas where it’s a gray area or launching in areas where you shouldn’t be launching in the first place. So really the way to avoid that is, again, only launch in cities where you can get a permit.

00:33:27:06 – 00:34:04:02

Jorge Contreras

That for sure is like a big risk. And the good thing is once areas have regulation in place and you can get a permit, whenever they do make adjustments, they tend to be very minor. The changes are major when there is no regulation and they implement one and they could likely not be in your favor. The other thing is as far as the actual numbers, just like when you use the, you know, the MLS or different resources to get the comps to figure out the RV on a wholesale or on a flip, we look at two softwares to get the numbers to extract the data, and that is match visor, which works everywhere in the

00:34:04:02 – 00:34:26:21

Jorge Contreras

U.S. except Puerto Rico. And then air DNA works worldwide. And so with air DNA, they have a an area on the rent a laser, and you can plug in an address and it’ll tell you what the projected revenue is for the next 12 months based on similar properties and bedroom count, bathroom square footage, location and the lease and all that stuff.

00:34:27:10 – 00:34:49:03

Jorge Contreras

So that’s what makes it really cool. So if you’re going into an area like Big Bear, California, or Poconos, like New York, they’re going to they’re going to be those are those are going to be like like seasonal areas where they’re like in Big Bear from November to May, you can make a ton of money, but on the other months, like, it’s going to be a really slow.

00:34:49:03 – 00:35:09:16

Jorge Contreras

But if you’re looking at what those properties did over the last 12 months that you just and it says, hey, this property’s projected to make $80,000 over the next 12 months and you’re going to have, you know, $40,000 in a ranch, then, you know, it’s it’s a no brainer. So that’s why I like using those softwares, because it helps mitigate some of the risk.

00:35:09:16 – 00:35:23:05

Jorge Contreras

And our goal is to be able to generate double whatever we’re going to pay in rents. If I’m going to rent a property for 5000, I want to see that there’s already properties making ten from rent. If I’m going to rent something for 2000, I want to see other properties are already making 4000.

00:35:24:05 – 00:35:43:04

Brady Winder

That’s awesome. That’s a really good tip. Thanks for sharing that. Are you? Yeah, especially for places like Big Bear. I mean, there’s a ton of places like that, you know, where we are in Oregon or down in Nevada are these little ski resort towns, you know. Have you found that to be pretty reliable or are you still trying to couple that with like talking to locals?

00:35:43:23 – 00:36:05:15

Jorge Contreras

You know, I would say it is it is very reliable, especially because these are like paid softwares. I think if they were free, I would be like, but they’re pretty expensive. Like the softwares are pretty expensive, like mass fighters like 800 a year. And with air DNA, I mean, we have the worldwide subscription, but you could buy just per city and it could be like 20 or $100.

00:36:05:15 – 00:36:45:06

Jorge Contreras

But with the annual worldwide subscription, it’s like 7000 a year. Wow. That said, the numbers that you’re getting right now from DNA based on the last 12 months performance. Right. The last 12 months is very different than these next 12 months. So I’m telling my students to subtract like 30%. So if I said that properties projected to make 100, you should only account for like 70 because people are spending way less money right now and we’re having to bring down our prices right now in order in order to be competitive because people are just not spending as much as they were six or 12 months ago.

00:36:45:06 – 00:36:50:22

Brady Winder

Yeah, people are tightening their belts, you know, and, you know, postponing vacations that they were going to take because it’s it’s getting more expensive.

00:36:50:23 – 00:36:51:13

Jorge Contreras

Exactly.

00:36:51:17 – 00:37:05:23

Brady Winder

Yeah. One of my questions was how do you, you know, I guess would be for your students because it sounds like most of your Airbnbs are local to Orange County. How are you forecasting future demand for other markets?

00:37:06:06 – 00:37:25:16

Jorge Contreras

Yeah, it’s a great question. So there’s two things that we do. The very first thing is to look into the regulation and then the numbers. So what we do is we just have them go on Google and look up the building department in that city. So if somebody wants to launch in Dallas, California, they’re going to Google and type building department and the city of Dallas, and then the phone number will come up.

00:37:26:01 – 00:37:40:18

Jorge Contreras

And then that’s where you asked, hey, what’s the regulation? Can I get a permit? Are you still issuing permits? What’s the process? How long does it take? How much does it cost? And then if you know you can get a permit, then the next thing is you go on. The rent advisor on air did a look at the projected revenue.

00:37:40:18 – 00:37:50:09

Jorge Contreras

Subtract 30% just right now for the recession. And then after that, if the numbers still make sense, then you can pretty much replicate that in any market.

00:37:50:09 – 00:38:12:09

Brady Winder

Okay. I gotcha. That makes sense in asking for a friend. These gray markets you mentioned, what’s the is this just counties or cities built in departments who haven’t decided their stance on Airbnbs? Like if you can’t pull a permit, but it’s not black and white that it’s illegal, do you get a slap on the hand? Do they are they even looking for those?

00:38:12:12 – 00:38:12:17

Brady Winder

Look.

00:38:13:00 – 00:38:31:20

Jorge Contreras

That’s super interesting because it’s funny because when you call the building department, they’ll say, Well, we’re not giving it you know, we’re not issuing permits, but it’s not allowed. And we’re like, okay, can you point me in the area on your website where it says that short term rentals are banned and they’re like, well, they’re not really banned, but they’re not allowed.

00:38:31:20 – 00:38:34:08

Jorge Contreras

And that’s how, you know, it’s like a gray area, right? Yeah.

00:38:34:21 – 00:38:35:14

Brady Winder

Yeah, yeah.

00:38:36:05 – 00:38:51:19

Jorge Contreras

And so, again, it depends like I I’ll give you an example. Like if you’re living in an area right now and it’s a gray area and you’re going to move out of that property and like you already own it and it’s like, dude, it’s already furnished, I’m going to buy furniture for the new house that I’m going to move into.

00:38:52:12 – 00:39:14:17

Jorge Contreras

We’ll give it a shot, an Airbnb. It’s like, cool, just ride the wave, right? Because you have nothing to lose. Everything to gain. And in most places they won’t issue you fines unless it’s actually banned because you’re like violating a regulation, right. Like in the city of New York, although it is changing and in New York and same thing, it’s they’re also changing it right now.

00:39:14:22 – 00:39:35:02

Jorge Contreras

They’re banned so they can give you fines, I think 500 to $1000 per day right now in those areas. But they are changing both of those regulations to start allowing short term rentals, which is good. But if it’s in a gray area and it’s not banned, they can really fine you for something that they don’t have a ban for.

00:39:35:18 – 00:39:54:15

Jorge Contreras

So it’s kind of things where depending that situation, you could just ride the wave for as long as possible like I did that the house that I mentioned earlier that me and my wife bought five years ago or six years ago, it’s still on Airbnb and it’s still a gray area. There’s no you you can’t get a permit, but it’s also not banned.

00:39:55:01 – 00:40:13:02

Jorge Contreras

So we’re just writing that way for as long as possible. And honestly, I don’t think they’re going to they’re going to like do anything. So some cities, I think they’re just going to stay that way. It’s just not really a priority because it’s also not taken up like there’s not a lot of Airbnbs in some of these cities.

00:40:13:02 – 00:40:30:03

Jorge Contreras

I think if it gets to the point where, hey, 20% of the inventory or 10% of the inventory is taken by short term rentals and they’re taking away from affordable housing and they’re creating a supply and demand issue and it’s getting more expensive, then I can see something happening. But until that happens, it’ll just be on a city by city basis.

00:40:30:21 – 00:40:43:12

Brady Winder

Yeah, absolutely. I mean, so I guess my last question would be as far as looking at the future, any things you see coming down the pipeline for Airbnb’s or it’s going to be more demand for it in the future or less? What do you think?

00:40:43:14 – 00:41:02:19

Jorge Contreras

Yeah, that’s a good question. You know, one of the things that I always look at and I like to go in to the Airbnb app and kind of look at who is booking our properties. And one of the things that I noticed frequently is that a lot of people who are staying at our Airbnb sites are staying at an Airbnb for their first time.

00:41:03:03 – 00:41:27:00

Jorge Contreras

And I know because it tells you when their account was created. So I’ll be like, Hey, this person created an account in January of 2023, like they don’t even have a profile picture. There’s no reviews. And you’re like, Oh, it’s like it’s a new person who maybe just discovered Airbnb. And I think that’s a great sign because people are realizing that this is an alternative way to have a have an experience of a vacation other than a hotel.

00:41:27:07 – 00:41:39:15

Jorge Contreras

And so I think like and of course, even when I just meet people all the time, they’re like, I’ve never stayed at an Airbnb. So I think as long as we have a lot of that demand, which I believe we will, I don’t I don’t think there’s going to be an issue.

00:41:40:11 – 00:41:56:15

Brady Winder

Interesting. That’s good to hear. That’s really insightful because to me I’ve stayed in them and I think I envy me like that’s our norm. I like, say, an Airbnb versus a hotel, even if I’m not even saving money because I just like the experience more. But I forget there’s still masses of people who just never say to want is mysterious to them.

00:41:56:19 – 00:41:57:18

Jorge Contreras

Right? Exactly.

00:41:59:05 – 00:42:02:23

Brady Winder

Anything you would want to add. People should know about Airbnb. Yeah. Yeah.

00:42:02:23 – 00:42:23:04

Jorge Contreras

I would say like there’s really three main things. If somebody wants to get into Airbnb arbitrage. And again, just to kind of preface this, my goal for everybody here listening is to own as much real estate because there’s no doubt that’s where you want to be. That’s where you’re going to create long term wealth, have that equity, that depreciation and you know, that’s how you create long term wealth.

00:42:23:15 – 00:42:44:12

Jorge Contreras

That said, most people I know are not in the position to go and buy like most people need like 2 to 4 Airbnbs to replace in 95. And most people don’t have money to go and buy two or three for 2 to 4 properties right now, but with the same amount of money that you could buy one, you could sublease like four or five properties and replace your 9 to 5.

00:42:44:21 – 00:43:06:04

Jorge Contreras

So again, number one, you know, verify the regulation. Just you don’t want to you don’t want your property or business to be short lived. So make sure you can get a permit, run the cons and the rental loser, pitch it as corporate housing and get permission in writing. And I say that because I’ve had a lot of people do me on Instagram and they’re like, Hey, the landlord just found out I’m getting evicted now.

00:43:06:04 – 00:43:16:18

Jorge Contreras

I got to shut down my business and like, that sucks is like, Hey, you should have been upfront with the owner and just get permission in writing. So those are the three like most important things when somebody wants to go into arbitrage.

00:43:17:10 – 00:43:32:11

Brady Winder

Hmm. I appreciate you sharing that. I think that that demystifies a lot of what could be a very mysterious and, you know, a lot of unknown. Yeah, that’s awesome, man. So you teach this, you coach students through this. You’re the guy to learn from. Where can people find you?

00:43:32:14 – 00:43:43:12

Jorge Contreras

They can find me on Instagram. My handle. Is that like THG and then cortijo. CONTRERAS So they’re working. CONTRERAS And make sure there’s no underscores or any of that stuff. It’s just name.

00:43:44:09 – 00:44:02:14

Brady Winder

Awesome. Well, thank you, man. I appreciate you sharing that. Everybody listen in habia value out of this. I enjoyed that conversation. All right. Thank you for. Sharing your story. I appreciate that. You know, those impactful for our audience. So anyways, everybody listen. And if this is a valuable share with a friend and we will see you next week.

00:44:02:19 – 00:44:23:14

Jorge Contreras

Thank you, guys. Have a good one.