[00:00:00] Speaker A: Foreign.
[00:00:03] Speaker B: Welcome to another episode of the Short Term show. I'm your host, Avery Carl. And before we get started, just have a few housekeeping items. We are hiring agents in a number of markets, so reach out to us at
[email protected] if you are in any of the following Orlando, Southeast Florida, as well as southwest Florida and the Poconos, just shoot us a message. Again, Careers at The short term shop.com also got a new book out. Please be sure to buy that. It's called Smarter Short Term Rentals. You can get that on Amazon, Audible, you can walk in Barnes and Noble and pick up a hard copy anywhere books are sold. So we really, really appreciate it. But without further ado, our guest today, Paul Graham. How's it going, Paul? Super excited to interview you today.
[00:00:49] Speaker A: Yeah, I mean, I'm super excited to be here, listen to a lot of your shows. You've also been helpful with kind of the short term rental journey. I mean, certainly it's changed a lot over the past, I'd say for sure, like four or five years. Right. But it's been fascinating to see more and more people get in. Also dangerous. Not everyone should be in or we got to be really careful how we get in.
So. Yeah. Excited for conversation.
[00:01:12] Speaker B: Awesome. Well, let's start out. Tell the audience a little bit about yourself, who you are, how you got into real estate, all that.
[00:01:18] Speaker A: Yeah, yeah. Initially got into real estate. I had a residential painting business when I was 18 and learned just about there's houses, right. And you could not just paint the houses, but you'd own the houses. Then through college, learned a little bit more and was just like, hey, I think I really want to go into commercial real estate. Ended up doing my undergraduate thesis on the best practices of commercial real estate brokers in northern Colorado and ended up getting into a software position for commercial real estate deal management type platform. And I talked to 1500 brokers across the country about software. But just like life, how they got into it, things like that, and eventually went into commercial real estate. You can't talk to everyone and they tell you all the good things, then you get in it and you realize, well, they're not all good. Right. And so I really found that, you know, real estate for me was more of like wanted to be more of an investor than necessarily an agent or a curator. And so I then continued my career in sort of technology and capital raising, but continue to deploy capital investment and this idea of joy into properties. And so I have a couple short term rentals And a long term rental as well.
[00:02:30] Speaker B: Okay, so tell us about Joy in. In properties. What does that mean?
[00:02:35] Speaker A: Yeah, so it was unexpected. So as a tactical way to also share for people out there. So my debt to income ratio was tapped to buy my. That was my second property. And so I actually talked to my parents and just said, hey, like this could be a win win for both of us. You want the tax savings, I want the cash flow as well as the investment, and I can manage it all. They at the time were living in Colorado, I was in Texas, and I said, hey, you could also come down and live in the property for whatever you wanted. Obviously, whenever you're not there, I. I would rent it. Right. So complete kumbaya. What ended up happening was something I didn't expect. And it's the idea of one. As a kid, I thought it'd be super fun to have a hot tub or a miniature golf course or. I didn't put the slide in the house, but I had plans to put a slide in one of the houses. My point is that it was bringing kind of some of those childhood experiences or thoughts into the properties. And lo and behold, people enjoy that kind of stuff. Right. And it was also like healing for myself. The other thing was that for my parents, they're in their early 70s and just by happenstance, I was like, hey, what do you think about this couch? This, you know, chair, whatever. Right. Because you're got to furnish the darn thing. And they just got really into it. My dad built a ton of different furniture. He even built one couch that only had instructions in French, which wasn't my intention. And I also never asked my parents to like help me, but they just wanted to and they really enjoyed it. And what I've really found is that my parents grew up basically just like very like nine to five, come home. Hey, how's your day? Great. Kind of eat dinner, go to bed sort of thing. Right. We're very hard, very long hours. Right. As we should in a lot of ways. But I really saw their personalities actually exist and come out when we bought this property in Canyon Lake, Texas in April of 2021. And, and I have seen them smile more in the past four years than I have in my entire life. And I have photos to actually prove it and show it. Right. So the idea of Joy is, it's not just about kind of the underwriting sort of numbers and things. Granted that is important because, you know, the thing needs to float. Right.
[00:04:43] Speaker B: Right.
[00:04:43] Speaker A: But it's also the idea of our intention behind the investments. And it's also been really cool. And I'm sure you have the same experience.
You're probably not looking at all the messages right now. Right. But know the time when you, when you started your Airbnb business and short term rental was just being like, hey, we're so excited to get our family together.
You know, we, we haven't seen each other in a while or we're celebrating a birthday, thanks so much for hosting kind of stuff. And it's like, you're welcome. And thank you also for paying the, you know, payment you did because, you know, we, we charge a high, you know, high price, but also, you know, give good value. So it's those kind of things that wasn't really expected. I was just looking for cash flow tax savings, but I got these additional things for myself. I saw benefits for, like I said, other people. And then I also saw this just like newfound life, if you will, from my parents too. So very cool.
[00:05:34] Speaker B: Yeah, I think you're right that so many people get so caught up in the cash on cash return. And I need 20% and this is at 19.97. So pass that. They get so bogged down in that. And then, you know, once they already own the property, they get so bogged down in like, well, the dollars and cents of everything that they forget you that what you are doing, the service that you're providing is a backdrop to people's greatest memories. I've seen a couple different memes going around recently about some study that said, you know, most children's earliest memories are not like the everyday of whatever they did every day, but early vacations with their families. And those are the things that people remember the most especially and that you get to be the backdrop for those happiest times of people's lives. And that's really actually rewarding when you think about it. It's like, wow, that's, that's really cool that I was able to give that to them. Yes, they're paying for it. They're paying for the service of, of having it. But that's okay. Like it, it's cool to think, you know, they really enjoy themselves. They're always going to remember that. And you were able to give them the space to do that.
[00:06:44] Speaker A: Yeah, absolutely. And I would then think to say that also has transitioned into how I, you know, design or do amenities. Right. Like, gone are the days of 2020, 2021 of here's a bed and here's a photo like, please stay, stay in my property. Right There's a lot more things, you know, that you talk about as well, that need to be done just to survive, if you will, in most markets are I would think saturated, but at least, you know, some of the ones that I've invested in or have looked in. And so that ability of like, hey, what would just be like impossible or just like really maybe difficult or challenging, but would like be really fun to do and, and how would that bring an experience? Right. I think of also like the Kissimmee which is like, granted like left field right of like super designed, like here's the Shrek room or the frozen room or things like that. Not necessarily advocating that every room in your short term rental needs to be to that extent because sometimes those can be like five to seven grand type, you know, renovations or design sort of things. But it's just the idea of, you know, hey, like let's do this or do that, like what would be again, you know, very exciting to do. Cause that's also going to be the individuals that come, like they're also going to think it's exciting. Granted you got to match like who's your ideal type of individual who's coming into the property and then match that excitement and you know, enjoyment for that. But regardless, just that sort of connection as opposed to again this just idea of like there's a bed, there's a photo, like you know, I'm going to charge two grand a night sort of thing. It just makes it more enjoyable too because if we're only doing things for the finances and the finances, you know, decrease per se. Right. Then I just have found it's just incredibly, you know, frustrating. Right. And if we're only doing it for the money and there's no other like heart, posture, intention, joy, just piece of service behind it, it's never going to be like enough or yeah, just kind of enough. Right. In terms of how much it's making, even if it's making like good amounts. And I say that from different property managers or other people I've spoken to where um, it just never is enough. And I've just really found it's also because it's a mindset thing of not actually thinking of what do we define as enough. And again, I've just found that as like joy is like the underlying sort of piece, assuming the numbers work like I said. So don't. Not advocating like you know, add a joy column to the, to the spreadsheet and just being like, yeah, I mean it's close enough and just do It, Right. Especially age.
But certainly, you know, that is a factor and that, that's also the unique factor too with different things which would make your property unique and have people, you know, come back or at least just book the darn thing. Right. That's a key thing to obviously with your business is getting people to book initially.
[00:09:22] Speaker B: I agree, I agree. So let's, let's talk about your first property. So the one in Canyon Lake, Texas. I love that market. Tell me about that deal. Let's talk about the nuts and bolts of it first and then the joy piece of it. So you know, what'd you pay for it? How'd you finance it? Why'd you choose Canyon Lake?
[00:09:42] Speaker A: Yeah, just market analysis. I at the time was living in Austin, so drivable. Also one of the two Clear Lake proper or lakes in Texas. The other one's Possum Kingdom in Dallas. And so it's just a unique location, very drivable for all the population, you know, short term rental demand, etc. Etc. Also affordable. That property is on the south side of Canyon Lake. It's probably like a half mile from the lake itself, but it's near like the three or four boat docks. So again, very well, you know, located.
The deal itself was a renovation. So also shout out for anyone who's looking at a property that was recently renovated. I do not recommend it. Anytime I've bought a property that was recently renovated, it always takes 10 or 15 grand just to bring it up to par and then kind of, you know, do the short term rental sort of renovations and preparation.
But that Property is a 3,000 square foot house. Four bedrooms, three and a half bath. It is a single level and then goes, you know, to a double kind of open loft area, which is really cool. And then it also, I also purchased the two additional lots next to it as well for future, you know, building.
And it was financed basically second home with my parents and did 10 down.
I think that was all your questions. But what, what else comes to mind or what else would be helpful for people, you think?
[00:11:10] Speaker B: Okay, so you said parents, so I want to, I want to hear about that. That's Tick Tock's favorite thing to accuse me of is my parents buying all my properties, which was okay.
[00:11:18] Speaker A: Yeah.
[00:11:19] Speaker B: My parents would look at me so crazy if I was like, mom and dad, will you please buy this property with me? They would be like, no. Patently like, no. So. But I do, I do want to hear about like, what's your pitch to your parents or any, any partner but particularly your parents, because they already know what a dumbass you are. So, yeah, what's your pitch to your parents when you're pitching them on. On buying a property with you?
[00:11:43] Speaker A: So for context, both. So dad was a database administrator, mom was like, principal in education, right? Very bureaucratic type of industries. I, at one point, grow, wrote a persuasive essay of why we should get WI fi for the house. And it was like, hey, that's really great, but we're not going to do it, right? Like, my dad had some, you know, sensitive information at work, and he's like, no, I can't bring that stuff home. You know, home. And it's like WI fi at home and your work that you can't bring home. Like, they don't mix. You can't bring your work stuff home. So, like, why is this an issue? Right? Needless to say, there were several kind of, I don't know, tension points, for lack of a better term. Like, just childhood of, like, this makes absolutely no sense. Like, why on earth would you not do this? So I'm not big on necessarily, like, convincing. And I've also found that from my time as a commercial real estate agent, anytime I convince someone to get to the, you know, signature line, right, for one reason or another, they backed out. And so it was like, this is absolutely pointless. Part of the reason why I also, you know, left commercial real estate, and I had made silly good money in software, which then helped me buy these properties. So I wouldn't say convincing at all. What it really was was a conversation. And it's, hey, like, what are your goals? Hey, I'm currently experiencing this problem. Like, maybe. What do you suggest? What do you think? I had this idea, I learned about this. Like, have you heard about this before? Things like that. I went into it not being like, oh, hey, you can help me solve my problem sort of thing, but I just learned more about it and shared that and it ended up kind of connecting and then it was just, okay, if we did this, how would this work? What are your, you know, kind of pain points, concerns, or what's kind of the, you know, opportunity kind of the boundaries of sorts. In a lot of ways, it's just like forming a partnership, right? Hey, what are your roles and responsibilities? What are the expectations if this happens? What do we think? Kind of explore the pink elephants of the room. So, meaning just like random things that, you know, would happen that we don't think would actually happen, but still having conversations about, right? What if a tornado strucks the House, like, how would we go? Would we rebuild or would we sell? Just those types of things to see if our investment values align. Certainly our values align because we are family and have a great relationship. But I think those things really come to mind, you know, for it, for how it, you know, is to be.
It's also to say just transparently, like, that property is appreciated, like, I don't know, 34%, you know, a healthy amount. Right. And so I've looked to take a second loan out of it. Well, my parents are still currently on that. That interest rate is 3.25. Right. So I don't necessarily want to uproot that. And so a second lean would make complete sense to then offset, to do the things, to do the stuff. My parents just don't feel comfortable with a second lien, regardless of my ability to, you know, increase my net worth or have cash flow or the number of business deals I've done, et cetera, et cetera. And so therefore, it's like, okay, again, just normal partnership, like, all right, so we just have a conflict here. Does that mean I refi them out? Does that mean I keep it, like, again, what's important to me, what would impact them, like those sort of things and just the idea of partnerships work well until they don't sort of thing.
So yeah, because things have changed over the years in terms of, you know, stuff. So, um, especially with, you know, anything family or anything partnership related, like having those boundaries, having those legal pieces in terms of, you know, agreement of company agreement, things like that is really just going to be helpful to finalize the conversation. Again, everything in real estate should be written. That's really going to be the difference maker. And as things come up, then kind of navigate. So yeah, this was definitely not a, like, hey, you know, buy me this, I want to, you know, talk about it at party sort of thing. It was an advantageous thing for them that again, you know, transpired into stuff because ultimately the, the key thing was just my parents wanted to save on taxes and I wanted to be the one to say, hey, I think it'd be amazing if you traveled more. Right. Because again, I saw them work a bunch and they didn't do a lot and then, you know, be kind of closer to me at the time and things like that. So really the taxes was kind of the, you know, conversation and the opportunity to kind of travel when and how they, you know, sort of wanted was just a new idea. And then like I said, it all, you know, came together. That was also just for context. And most people would probably, you know, understand this if you were investing at that time. I try to invest in Point Venture, which is outside of Austin, kind of Lago Vista near Lake Travis. So an hour north, right. Of Austin, as opposed to, like, an hour south. And literally, in the span of, like, two days, some of those houses increased 100 grand. They're like, hey, we're no longer taking, you know, properties that. Or we're no longer taking offers that are under, like, 600 or something like that. And it's just like, it was listed for 480. Like, what do you. So needless to say, like, there was a lot of pivoting and stuff. And, hey, I'm willing to do this, but not that much, like, kind of a thing.
[00:16:39] Speaker B: Right.
[00:16:40] Speaker A: So, again, and that also just transparently just brought us closer together, like, as a family, because we had more to talk about than just like, how was your day? Or, like, what are you doing? It's like, oh, hey, no, like, you know, what do you think of this chair? Like, okay, we need to find another property. You feel comfortable with this? I don't feel that, like, kind of stuff. So not necessarily advocating everyone go, you know, buy properties with family of sorts, but it just, you know, worked with myself and, you know, for this situation.
And there's not been a need to change our current agreement or how we're showing up with it.
[00:17:11] Speaker B: So you said something that I want to zoom in on you. So you're going into a partnership with your parents. You did get a legally written partnership agreement is what you said, right?
[00:17:21] Speaker A: Yeah. Okay.
[00:17:22] Speaker B: Super important, guys, because so many people are like, yeah, let's. Let's invest together and let's do whatever. But even. And I've said this on podcasts before, even if you're investing, like, with your mom, you need to have a written partnership agreement that lays out exactly what happens if X, Y, and Z happen. Like you said, like, if it gets run over by a tornado, are we selling? Are we rebuilding? What are the things that we're going to do? And I love that you're investing with your parents and you still have that, because so many people, I think they're like, oh, we're best friends. It's fine. We'll just, you know, do. We'll work it out. And they don't get that. And then something happens that we're like, well, now what do we do? And they disagree, and they didn't have that. And so now what?
[00:18:04] Speaker A: For sure. Yeah. I mean, I would say ultimately it's the idea of just how I approach in terms of intentionality and the. In the idea of, like, clarity is kindness. And so it would be inappropriate for me to absolutely not have an agreement. And it's because, hey, I want to be very clear. And it's because being clear and intentional, I'm very kind. And with that, I want to know, like, when are you. When are you out, right? Like, what comes to mind? Is it because of this or because of that? Like, when is it too much? When is it not enough? Like, those types of things? Because ultimately that's also going to teach you how you interact and, you know, work through problems like today. And, you know, there's been situations where I've almost gone into a partnership, and it's just like. Just even, like, how we were going about potentially purchasing property wasn't the same. And it was like, hey, like, I didn't hear from you on this. Like, there's a couple missing things. I mean, this is just relationships in general, whether it be, you know, partnership, cowork, you know, romantic, etc. Just, like, how we're communicating. And if that's, you know, a fit, not just from a value standpoint, but from, you know, kind of a vision as well as operationally to see, you know, how things kind of transpire. And again, that clarity is just going to be the kindest thing to do.
Especially the idea of, like, how do we. How do we, you know, break up? Like, if you just want out, what does that look like? Does that mean just liquidating? Is that this and that? Because I've also had, you know, friends or people. I've been in some situations where it's like, hey, I just want out. And it's like, well, I don't have 50 grand. Just chilling, because that wasn't part of my underwriting because I thought we were in this to the end of time sort of thing. Now sometimes, you know, family things or life things can come up for, you know, asking for a liquidity event, but just being prepared and aware, as well as the idea of being knowledgeable of what that, you know, looks like. Right? So if you know that you do a second lien, you know that you could refinance with dscr, right? You could, again, do these things. That also means that you have that ability. So definitely exploring and learning that, again, will just create the best environment to potentially become partners. And not just like you said, hey, this is super fun, and we can make a bunch of money and, like, leave our jobs and, like, talk about our cool, short Term rentals at parties. It's. We also have a, you know, solid, clear partnership. Right. Again, everything in writing and just kind of navigating that as well.
[00:20:20] Speaker B: Very, very good advice, guys. So let's talk about. So that's the. That was your first one, which we spent a long time on. But. So how many have you. Have you raised capital to. To do some more? We kind of. Now. Now that statement is, you know, 20 minutes ago, so.
[00:20:36] Speaker A: Sure.
[00:20:37] Speaker B: Refresh.
[00:20:38] Speaker A: Yeah, so I.
I personally own another one. I sold a condo in Colorado. It's my first property. I bought basically right after, you know, college. Paid all, you know, my debts off and then, you know, bought that. That was 10:31 exchange to a property. So that's in Lago Vista, so near Point Venture along Lake Travis. That is a house about 2500 square feet of sorts. Six bedroom, four full bath, huge yard, as well as the lot next door. So that's been a huge thing of just having the lot next door just because of the highest and best use, if you will. It's a commercial real estate term. It just helps with, you know, the underwriting. You add another house, well, bam, that's, you know, gives you a lot of options. I've also looked at, you know, putting a, like a pool, but also like a lazy river. Right. Like, that'd be really cool. Or you see this a lot in Scottsdale, like the kind of go pedal car tracks, if you will. Thought about putting some of those. Granted, that takes a lot of capital, so I've not done that yet. So that's my second one.
And also just to share like, both those properties were doing, like, okay. Right. The idea of like 20, 20, 2021. Now with redesign and with, you know, more amenities, I was able to double the Canyon Lake revenue. And so that's now profitable. It wasn't for actually a couple years. And then the Longavista one, I just recently renovated and, you know, excited to see how that does both these properties are what I define as super properties where they sleep 16 plus, they have, you know, great amenities and they're, you know, considered, you know, unique. So Canyon Lake currently sleeps 16, and then Lago Vista sleeps 20 in a very comfortable way. Not just like sardines. Hey, there's five couches, like in the floor. Right. So just to throw that out there.
So, yeah, there's been a number of different things to like, raise capital for or look into. So I've really good friend in Indio, California, who runs luxury desert escapes. And so he has a number of properties that he owns personally and also manages and works with clients as well.
And just providing the, again, like I call it extreme amenities, right? Again, within the super properties has just been, I mean, really stinking cool, right? So for example, it's like, hey, let's not just have a slide that goes into the pool, right? Like that's pretty cool. But also like, let's make a like concrete crocodile slide that then like goes into the pool, right? And then it's the, you know, like Neverland sort of theme or things like that, right? He has a bunch of different types, but just how there's a theme of the property, how the name coincides with the theme, how they're again, super property type things as well as a number of different just kind of aspects and feels to the property that again are just very different than here's a house, here's a bed, here's some, you know, kind of artwork as well.
[00:23:27] Speaker B: So, okay, so let me ask you this because it's rare we get people who have come from commercial over to residential on the show. So what is, what would you say are the biggest differences in underwriting when you're underwriting a commercial property, when you're underwriting a residential property that's also income producing but it's still residential?
[00:23:51] Speaker A: Man, my mind is like spinning with thoughts of just what's coming to mind and then also just kind of advice pieces of it. So let me think of one or two things and then, you know, keep hitting me with more specific things as they come up. And let's go, go through this because it is important and it is, you know, unique. So commercial side, the most important thing is net operating income, which is then the value of how you get your property, right? You want to ideally have lower kind of rents, right? You do some sort of value add, you increase the property, kind of like cash out, refi sort of thing. From an underwriting standpoint on the short term rental, we are really just looking at, you know, the air DNAs or getting some sort of numbers of sorts or the, the comps and then be like, okay, hey, I think this is going to be, you know, 100 grand property. Ultimately, what I've seen and experienced from either property management management companies that I've talked to on kind of the luxury sort of side and just even my own experience is the idea of just like, we don't actually fully know. I've heard time and time again, I'm curious if you have of just like, oh, this is doing better than we thought, right? So it's like hyper conservative underwriting. Hey, sure, I'm comparing a four bedroom with another, you know, four bedroom. But it's a lot more, it's a lot more detail and like scrutinized. Right. So it's not to say just because it's a four bedroom and there's a four bedroom, like it's going to perform the same. Absolutely not. The other thing that is absolutely imperative to focus on from an underwriting standpoint is market saturation and market transformation. So saturation being like, you know, basically it's supply and demand, right? If you add another property, you're not going to do the exact same numbers as the one four doors down, right? Because there's. Unless demand is increasing enough for it to stabilize what your additional property is going to be. That's one thing that I wish I would like, know and at least be aware of. And I say that from a sense of like potentially walking away from dealing deals that are like on the cusp. And it's also the idea. I'm currently writing a book on this, on the Investor's Guide to Joy, where I've just found that like my. So my top strength is being analytical, right? I took strength finders 2.0. Analytical is my like top one. And what I find is that I love Excel spreadsheets, obviously, and I have a pretty big ego around it because it's just my like highest and best skill that I'm like, oh, for sure. It's definitely going to do six figures and like da, da, da, da, right? And then it's just going to go up and to the right, right? The big thing is just why are we investing? Right? And again, like we talked about initially, it's just like if I'm only investing for the returns and they don't, you know, happen, that's just going to be a very challenging emotional piece. And so beyond what the returns could be and the income we could make and things like that, I have found if I approach it more from like a heart sort of standpoint as opposed to just the Excel spreadsheet ego analytical mindset, I walk away from deals and I don't even look at some deals because it's just too. There's maybe not enough information for me to actually understand. Short term rentals in some ways can be a little bit more of a. I don't want to use the word gamble because we are using data, but it's a calculated risk to understand. I've seen time and time again, especially on the bigger deals where it's like hey, I'm going to buy this property for a million sink maybe 2 to 400 grand to it. This is granted a more extreme case and then it's going to be worth 2 million and then I'm going to cash out, refi all this stuff. Like it totally makes sense on paper. But ultimately do we have the skills, knowledge and resources to execute on that? And again, will the market allow it? You know, you and I have both seen a number of different markets change and it's the idea of like would this actually float? And the idea of, and you probably know the term of it, but I've just kind of thought of like what's the purchase price versus what's the gross revenue?
And like I've seen some deals that are at like the 10% right. And so we want to ensure that the gross rev divided by the purchase price like is at least you know, 15 kind of 20% sort of piece because that means there's a lot of meat on the bone and it gives that flexibility as well as like I mentioned buying with lots of land, buying with these things that we can improve versus just taking it as it is. Because with short term rentals they're constantly changing. I feel like every year, maybe two years. And so being able to be really flexible versus commercial real estate tends to be a little bit more static. Right. So the difference between static and dynamic. So those are some things that come to mind in terms of perspective, mindset and then like actionable things as well as just some education depending on where people are at.
[00:28:18] Speaker B: So yeah, yeah, I totally agree like with, with commercial, you know, the income is what the income is until that lease is up and you change something about the property and you're able to increase it. I mean I'm, I've apartment buildings, I don't have like true, you know, like business complexes or anything like that.
But with short term rentals it's so extremely subjective because two people can own the exact same property with the exact same amenities and do wildly different numbers just based on a few tweaks in their management style. So you're right, it is. You kind of have to work with ranges instead of exact numbers which really hurts some personality types brains typically the, the Excel spreadsheet type like you.
But yeah, it is, it can be, it's difficult to underwrite a short term rental. Anybody that tells you that it's easy is, is lying to you because it's so subjective. I might, you might be able to do better with a property than me or I might be able to do better than you, just depending on a few things. As a matter of fact, we have an agent on our team who has two identical properties. She built both of of them right next door to each other. They're the same exact properties. And one of them last year did 20,000 more than the other one. They have the exact same view, exact same everything, same manager even. So it is just extremely subjective. So. Yeah, I love that.
[00:29:39] Speaker A: I mean it, it reminds me also of, Yeah, I mean that's, that's like even more fascinating. So for some people that maybe just, you know, their brain just like went kaput and they just maybe lost the idea of like, hey, I probably should invest in short term rentals, like probably like shouldn't then, right? If like that's the reason that would like, you know, kick you out. Because the other thing that comes to mind is just the idea of like, how are you also going to manage it? To your point, right. I had the enjoyment of living in Costa Rica for a month and a half last year, right. And stayed at a bunch of different Airbnbs. Side note, I no longer enjoy short term rentals international countries because there's just different standards on cleanliness or just communication and logistics and stuff. So more of a hotel guy to say the least. Regardless, there was one specific that really stood out to me. I'd have to, you know, go back and look, but she had like, oh my gosh, so many five star reviews. I don't even want to like misquote how much she says. And it was just like, how, how do you have this many, like, what, what's like the secret? And she ultimately was like, I, I've created friends on this platform and really good relationships and connections. And that's one thing that was really eye opening to me, where it's not just got the property, you know, doing it for the right reasons, things like that. And it's also, what does that mean in terms of how I'm communicating it, right? Am I running it? Is it maybe my wife or husband running it? Because I've seen a lot of that, right? So you know, as a family we could use it, but then get the tax, depreciation and then also the income kind of stuff, right? But the other thing is just, are we just setting the automation of like, hey, hope you have a good stay, give us a five star review, right? Or is it more like, oh, great, you're coming for a birthday. Like, that's so amazing. Like, you know what, I don't know, those type of conversations really that connection again, the idea of like why you're doing it and how you can really foster that sort of service. That's another thing that I've seen because that also then means your reviews are going to be impacted. And we both know that as your reviews decrease, your revenue drastically decreases. So it's very important to not only provide service just because you're a kind, good hearted, you know, human who does very well things, but also because you know you'll get the results, you know, of that. So that's another thing that I've kind of taken away that was not in the Excel spreadsheet, right. That I've, you know, learned along the way. In addition to kind of like the change of the titles, changes some of the photos and the descriptions and that kind of stuff, which is a little more, you know, technical. But at least getting the property is the big thing as well as just, you know, getting the right best photos, like the Twilight kind of stuff. But yeah, that's super interesting. Side by side that happens. I have a friend, Scriven, who has two properties next to each other in Canyon Lake and I'll have to ask him to see if he's had a similar type of experience. But it also gives the opportunity, right, where you could rent both, you know, as a total unit. And so I've seen how some people have leveraged that for more, you know, income or income potential or diversification to ensure that regardless, the property, like will, you know, be underwritten and work. And that's another piece of advice and thought that I've had just to, just to share with the idea of like make sure the property or the best type of property will be one that can be a long term rental, a potential midterm rental, but you could be using it as a short term rental. Both my short term rentals are in, you know, vacation type markets. The underwriting for long term rental doesn't make sense. Midterm rentals not frequent enough. So candidly, those are a lot bigger gambles that I've come to realize than I were into like other markets or other things. So just being aware of those things also means that you're going to need different reserves. That's also going to mean you're going to be more conservative with your underwriting maybe decreasing by 10% from revenue. Oh, but then it's not going to produce six figures and then it's not going to do this and that. Okay, well then it's maybe something to walk away with. Right. Or potentially there's a value add like I mentioned in the Lago Vista property that sleeps 20. It initially sleep 14 and I blew out a closet that was 8 foot by 6 foot. No one needs that big of a closet. In a master bedroom. There's two main bedrooms and I put two bunk beds. So instead of sleeping two and now sleep eight very comfortably. So also when you're in those underwriting looking for again, the highest and best use, and that's again an idea from commercial real estate. Do you have a parking lot or do you have a 16 story, you know, apartment complex? Right. Like the highest and best use would be obviously the apartment complex. So that sort of mind shifts, mindset shift, you know, putting those numbers in, being extremely conservative and you know, having some of those data points and underwriting definitely kind of bring that kind of commercial real estate mindset to, you know, short term rentals for sure.
[00:34:16] Speaker B: Love that.
So we're, we're coming to the end of the show. This has been a really fun, interesting interview. Definitely different than, than a lot of the guests that we have on. But we've got three questions that we ask every single guest who comes on. And the first one is what advice would you give 20 year old Paul?
[00:34:35] Speaker A: Oh man. For just investment or what? My brain's spinning.
[00:34:39] Speaker B: Just life.
[00:34:40] Speaker A: Just life, man.
Yeah, it's, yeah. Really the idea of focusing on relationship capital and like spiritual capital, if you will. However that might be defined as you either the belief in yourself or belief in, you know, kind of a higher, greater power than you would in investment capital. Reason being is I set toppled my net worth in the span of 18 months and felt incredibly lost and just misguided. Part of that was, you know, purchasing these properties and that's why I built, you know, the brand the investors guided joy of helping just investors focus more on, on joy. So that would be the thing. And it's because I've had like the most coolest experiences, better investments, all these amazing just things as I focused again more on the relationship capital, spiritual capital and like having joy as the underlying thing than just just the dollars. I've made more dollars by focusing on that, which just makes no sense to 20 year old Paul, but I hope he listens to it twice. Right. And then eventually kind of gets it of sorts.
[00:35:45] Speaker B: So love that. All right, this one's more of an investing question. What advice would you give to a new investor who's thinking of getting started in short term rentals today?
[00:35:57] Speaker A: The immediate thing, and I mentioned it before, but could Just pound this table through is just do not buy a property that was recently renovated. Ideally find something that was cared for as well beforehand. That's another thing to add to the underlying underwriting criteria because both of these properties, they were recently renovated and like I said, I put 10 to 15 on the canyon lake and like 15 or so on the Lago Vista one. Again, just kind of bringing it up. Hey, the door handles don't work, the door doesn't close. Like this kind of stuff that would ruin reviews. That's just you need properties that are well maintained but not just well maintained in terms of maintenance, but well maintained of like they just work. No one likes a door that doesn't shut. Right. That's going to cause, you know, issues in reviews and communication, things like that. So no one ever told me that. Never really found about that. So that's one big thing I'm clearly very passionate about is be aware of the property and the property condition as a short term rental, not just the fact that it could be a short term rental. So you're going to have a different eye as you look through it.
[00:37:00] Speaker B: All right, great advice. And last, what is your favorite book that's impacted your mindset?
[00:37:09] Speaker A: That's a great question because it just has depended on when I'm at or what I need or what I want or things like that. I have like 40 books that I like recommend. But let's think of one that like comes to mind right now.
Yeah, I mean this came to me this morning. It was just the obstacle is the way it was the idea like we can do hard things. I've done 75 hard a couple of times and like the Live Hard program for example. And can I also pick up the phone and call, you know, five brokers if you will or do these kind of things like could I go to the gym for three hours? Great. Could I also do the things that I need to do? And so it's the idea of not just being able to do hard things that's the first step. But it's also can you do the right things that actually move the ball down the field? Because the only way to get, you know, a short term rental in this example is is to ultimately connect, talk with people, underwrite. And so those are the inputs to then have the eventual outcome output of having a property. So you just got to be able to do those inputs that, that might be hard, but that's just how it gets done. So for sure, obstacles away.
[00:38:17] Speaker B: Love that book and everything Ryan Holiday writes. Yeah, true yeah. Yes. Love him. And last. So if our listeners want to follow you, learn more about. You learn more about the Investor's Guide to Joy. How do they do that?
[00:38:32] Speaker A: Yeah, website, you know, has kind of some resources for people in the sense of like, different investments. Call it oil and gas, short term rental, you know, all that kind of stuff as well as, you know, podcasts that I host and, you know, connect with socials, mainly on LinkedIn, post sometimes on, you know, Instagram, really just kind of more personal type things. But I really just like connecting with people, especially in the age of AI and social media. Right. Just, you know, finding me. Typically, my handle is it's Paul Graham. On Most socials except LinkedIn, it's Paul H. Graham. Graham spelled like Graham cracker. And yeah, we just love to, you know, connect or just give advice or thoughts. I've had people that have been so kind to, you know, pour into me and that's really transformed not only my life, but my parents life. And I've invited other people along the way like my parents, and it's just been such a joy. So thanks for having me, Avery. It's been a great conversation and, you know, kind of a bucket list thing. Right? Like, it's just been so cool to see from the start of, you know, doing short term rentals to, you know, now sharing my story and talking with you. It's a great industry, great product. Again, it's just doing the right underwriting, having the right intentions and having fun. So.
[00:39:49] Speaker B: All right, well, you've been a great guest, Paul. Thank you so much for coming on.
[00:39:53] Speaker A: Thanks, Avery.
