Do you dream of living or investing at the beach but think you’re too young, or don’t have the cash to get started? Have you heard about off market deals and wish you knew how to find or initiate one? Do you know you could be insanely successful at Airbnb investing if you could just get started?
If so, don’t miss Episode 25 of the Host Coach Airbnb Investing Podcast with Phillip Marshall, where he shares his journey of making six real estate deals without using a bank, and how by the age of 28, he has house hacked himself into the dream of living on the beach for free!
Read on to be inspired and also to take away actionable advice on how to get into Airbnb investing when you don’t have any savings.
Topics discussed in this episode:
- How to live in your dream home by house hacking with Airbnbs
- How to find off market deals
- Phillip’s exact script for convincing investors to give him owner financing
- The best way to avoid the squeeze of stretch real estate investments
- What qualities to look for in a life partner to build personal success
Host Coach Airbnb Podcast Episode 25 Show Notes:
Phillip, tell us how you achieved your dream of living at the beach.
Well, it's definitely a long story, but I'll shorten it down as best I can. I started real estate investing maybe three or four years ago. I got into some long term rentals, joined a real estate brokerage to do sales in order to make as much money as I could to invest as fast as I could. I did a couple long term rentals, a flip or two, then invested in an Airbnb, and eventually traded my way up. Sold that Airbnb and got the property to buy the triplex that I'm at now in beautiful Carolina Beach.
Here's the backstory listeners: we've known Phillip for a number of years and have watched his journey and it's been amazing and fun! I remember him video walking us around the beach triplex before he purchased it. The property even came with a Jeep, right? A Jeep came , with the property. I just think that's fantastic!
How did you find this property?
So, being a real estate agent, I've got a lot of different investor clients in the area, and I have one that purchases hotels. He owns a few in the area and we walked a motel here in Carolina beach. That deal never ended up happening for him with the hotel, but I had a great rapport with the seller of that property and felt like we had a good connection.
How to Pitch Off Market Deals
So before I left, I made sure to tell her, the exact same thing that's landed me every off market deal that I've done. It's, "Hey, you and your husband are doing exactly what I want to do one day, and I'm sure you get this a lot, but I would love the opportunity to take you out to lunch or drink or whatever. I would just love to sit down and hear your story on how you've gotten here."
That's really how it started. A week later, we went out to lunch and I told her that multifamily was my next goal, and I wanted to be in Carolina beach if I could. She said, "What are you doing after lunch? I think I have something I want to show you." And drove me right over to the property I now live in and use for Airbnb income.
So by being humble, taking some time to build rapport with someone that you instantly gain their trust. And they're like, "Hey, I want to help you out." Because obviously you're highly likable. Why did you want a multifamily unit?
House Hacking With Airbnb
For one, I wanted a house hack. So that was important to me. You know, if you can cut down on your rent or mortgage and not have to pay that, then you can invest even faster. Depending on where you're at in your journey, if you've got a wife and a bunch of kids, maybe it might be a little bit different. But where I'm at in my journey, it makes more sense living in a unit that's beside another or two more. I've even put a roommate in there too, to get more income out of the house hack. So a multifamily unit just made more sense to me.
And for our listeners who are new to investing, house hacking is when you live in the property and then fix up the other units associated with that property. So it's paying your mortgage while you're living there on site. You have three separate units under your one roof, right?
Yes, it is a single family home that was split into three separate units. So the downstairs is a thousand square feet three bed, two bath. That's where I live. The upstairs is a three bed, two bath, the same layout and size. And then there's a one bed, one bath, apartment attached to the side of the house.
How are you utilizing each of those three spaces now?
I live on the bottom floor. The upstairs is an Airbnb. That was the first unit that we got ready. And then we should have the one bed, one bath up and ready soon.
That's fantastic! How long did it take from the time you were shown the property by this woman and purchased it to moving in?
How to Get Sellers to Work with You Off Market
Focus on being genuine and making sure that you can give the seller what they want. A lot of times they're willing to work with you and help you, especially if you have a good connection with them. This owner really saved this property for me and made sure that I was going to be the person that was going to get it. She thought that another big investor was going to come in, knock it down, build a giant new mansion here on the island. She didn't want that. So the owner worked with me for about six months till I was able to get the money and be able to purchase this house.
Then after we purchased the beach house, as with every single deal, I thought, "This is going to be reay in ta few weeks." I'm on the phone with you guys saying, "I'll get this thing done in a month." Unfortunately, it took a lot longer than I thought. The bigger the house, the bigger the expenses, the bigger everything. We bought in September, we worked hard and got it ready around January. So, it three months, and then we were in the off season at the beach. We listed the Airbnb, but we didn't really get any rentals until February.
How did you finance this multifamily investment?
So, fun fact, I've done six different real estate deals and none of them are through a bank. I've done all of them through different ways of creative financing: owner financing, partnering, all different types of things. This one was purchased through owner financing.
That is the holy grail of non-traditional funding and you're the king of non-traditional funding! If you've read our Airbnb investing book, Philip is the guy we're talking about in our non-traditional funding chapter. So, how did you accomplish this? Everyone wants to find owner financing, and it's amazing that you keep doing it!
I think my superpower is very quickly, within a few minutes, getting sellers to trust me that I'm going to be able to do what I'm saying I want to do. It sounds like a script, but I'm being genuine. I'm very interested when I find someone that's doing what I want to do. And a lot of the time, these investors, they're 50, 60, or 70 years old and no one is asking to take them to lunch to learn from them. So when they see somebody who's actually interested, and wants to hear how they build their success it they love talking about their deals. They want to tell you everything about it and share their story.
How to Secure Owner Financing
It's also important to find out what does the current owner want? What are they looking to change? What are they looking to keep the same, that makes seller financing work for them?
With seller financing, especially if they've never walked through it before, you have to persuade and convince them that this is a good deal for them. So it's a win win on their part, no matter what, if you buy this property and you end up not being able to handle this mortgage, but you've put a down payment and 5%-10%. And then you pay these mortgage payments the entire time. If the owner forecloses on you because you can't handle it, well then they get the property back and then they keep all the money that you've already invested. So it's a safe bet for them.
Once you do your first owner financing deal - then you have proof. As soon as I landed the first one, that's where my confidence of pitching this to people went through the roof and you could just see that I was absolutely certain that the deals would work.
Why Investors Would Consider Giving Owner Financing
You explained it to me that a lot of investors are just sick of the grind, right? What they want out of the asset (house) is a fixed return. And you're providing that through your new mortgage payment to them without them having the hassle and headache of finding new tenants and preparing the property. Is that right?
Absolutely. That's exactly what this person wanted to. So, it's an expensive property. If I ended up buying this triplex through a regular financing option or cash, the seller is going to have a gigantic capital gains tax bill. So that's one thing that they're not getting away from, but they're kicking the can down the road for a little bit.
They want what I've heard it described as "mailbox money." The sellers want that check every month without having to take care of the property. They don't have to do the maintenance anymore. They don't have to rent it. They don't have to deal with the tenants. It's all on me now, but I make the majority of the money and then they get monthly checks.
House Hacking Revenue
How much has this Airbnb you share a roof with grossed so far? Is it covering your mortgage?
Yes. I just did my taxes and it looks like I'm without even having the roommate in there. I'm coming out of pocket about 500 a month. And then I have my roommate that pays $600 a month in rent. So actually, I'm making $100 each month.
Once the other unit is up and running, that's where the cashflow will come from.
So, you're living in a gigantic house in Carolina beach for free. You're technically making $100 a month before you've even turned the second unit into an Airbnb.
Yeah.
Amazing! That's what everybody wants. I want to live at the beach and Culin keeps telling me no. Perhaps we need a triplex.
Biggest Airbnb Investing Mistake
You've talked about all these successes and connections you've made. What is the biggest mistake you've made in Airbnb investing?
Well, I'll be honest, this property here might have been a little too big, too fast for me. My last property cost around $200, 000 and this house was around $600,000. I underestimated how much everything was going to cost. I just knew that if the numbers worked, this place was going to work.
I knew it and I could see the vision, but I was not prepared on how much all of the expenses would be. I mean, the mortgage and all the monety that went into getting it ready. And then while it's getting ready, I'm bleeding the mortgage and the expenses. It has been a learning process.
We're often focused on the purchase price, but maybe not realizing the expenses of utilities, renovation, decor, and furnishing for a 3,000 or 4,000 square foot place. That really adds up versus a 1,000 or 1,500 hundred square foot investment property.
Phillip's Airbnb Investing Advice
Building off of that very honest answer, what would you tell our listeners to think about or do differently to avoid that painful squeeze moment?
What I would have done differently and what I would recommend, is you really need to have someone who can assess how much everything's going to cost to get a property up to the standard of that area or a little better.
So what I've done with all of my other units is look at the top performers in the area, look at their properties and then model mine after them. You need to figure out how much is it going to cost me to get that property in the exact same condition as my competition, or preferably better so that you can outperform them in that market. I advise getting really dialed in with your repairs numbers and know whatever you end up with, it's still going to cost a little bit more than that.
Biting Off More Than You Can Chew
That was a perfect answer. And please listen, listeners. We've all bit off more than we meant to as investors. Culin and I accidentally bought three properties at the same time, which wasn't supposed to happen. And the squeeze was the real deal. None of the properties ended up being as nice as I wanted.
We did over time customer-fund getting where we wanted to be, but it is definitely a moment in investor time where you're like, "What have I done?" We're obviously going to make it work, but it doesn't feel good.
Just to jump in on that, I've talked to a lot of my investor friends that buy hotels and giant properties. And the one thing I've heard is, "If you're never feeling that squeeze, the pressure's not on and you're not pushing it enough."
You are NOT Too Young to Invest in Airbnbs
I've talked to some friends that are my age, and they think I'm absolutely crazy. Their risk tolerance is so low, so they'll never do anything like this triplex deal. They thought I was out of my mind, and that's kind of a good sign that I think I'm moving in the right direction.
You're 28, Phillip and you bought your first investment property at age 24.
So anybody out there who's like, "I'm too young, or I can't do this, or I don't know what I'm doing." Please be inspired by Philip. He started investing at age 24. If we had started our Airbnb investing journey at 24, it would be ridiculous where we would be right now.
How to Buy an Airbnb if You Don't Have Money
Please give our listeners who are dying to become Airbnb investors, but are short on cash, some advice.
That has been me the majority of the times that I've invested. Brandon Turner on Bigger Pockets said, there's like this triangle in real estate investing. You have to have the time, the hustle, or the money. So you need two of them.
If you don't have the money, then you need to have the time and the hustle. And you also need to spend a lot of that time learning and running numbers and understanding everything you can to pitch somebody who does not have the time, but they do have the money that you are going to take their money and make this deal successful. I've done partnerships on my first four deals. The last one and this one were the only ones that I've done on my own. So, that's what you're going to have to do. You either have to get a very high income job where you're making a lot of money and something preferably like sales and get your expenses as low as possible.
The nice cars and clothes and all the stuff to show off is just not going to happen. I mean, I've shaken hands with many, many millionaires that are real estate investors, and they do not care about that stuff. They care more about buying assets and making their money. So expenses to the ground, and then you got to get an overdrive on getting the income as high as possible as you can. But if you don't have any cash, you want to find a deal. You need to be able to understand the numbers with the deal so that you can pitch somebody and somebody that you trust or that trusts you that has money and they just don't have a lot of time, but you were confident that you can make this work.
The first deal is the hardest one, because what have you done? You have no proof. You have nothing. All you have is this idea that they're going to look at you like you're crazy. If they've ever been involved, like all my friends thought I was crazy. Then you get the first deal, and once you have proof that the first one works - then you can start to gain momentum.
The deals almost start finding you at that point as well.
Absolutely. I had one where I refinanced out the owner and then they called me three or four months later and told me, "Hey, we have $250,000, and we want you to go do something with it." I just couldn't believe it. I got off the phone and was just like, "Who am I? They're calling me!"
I think it's a testament to you, your hustle, and the amount of time you've spent building knowledge to be successful. People see it and they want to be a part of it.
Airbnb Investing & Relationships
Going a little bit off topic, you're somebody that reminds me of us in that you're highly successful in investing, but it seems like you're also highly successful in your relationship.
Do you have anything you want to share or say to our listeners? If they're single and want to invest. What kind of a partner should they be looking for?
Absolutely. So my relationship grew over the years and we both learned about finances and everything together. We both didn't start out with anything, so it kind of grew over the years as I was learning she was learning. You have to find somebody that is going to be on the same journey as you are. Once you start making some money if cars are important, the nice clothes, the nice things. But, starting out there's going to be a period of where you're not going to have a lot, or it's going to look like you don't have a lot as you're snowballing everything back into investing. So the mindset around the money and finances is very, very, very important.
If one person is not on board with that, it's 100% not going to work. Every power couple that I know that is real estate investing, my hotel friends for example, they are just so in it and the drive to get the next one and to be financially free is just so important to them. They don't care about clothes, cars, and showing off.
The people that sold me this house are another great example. They care more about what is in the bank account and how we're going to buy the next one. And the mindset around money is important.
That's great perspective, and something that I feel like doesn't get touched on a lot when we talk about investing. Who your life partner is and their mindset is a huge component of your success. So thank you for being candid about that.
Philip, this has been amazing how can our listeners get in touch with you? Where can we find you if we're looking for property in the Wilmington, Carolina beach area or have questions about short term rental house hacking?
. If anybody has any questions about anything, wants to reach out, chat more about it, or to invest in Carolina beach or Wilmington, or even to make it a move down here, my social media is @soldbyphil on Instagram and you can check out my YouTube channel livinginwilmington.
