Devin Solow, Jeremy's landlord, on 50 plus doors

Quick Summary

Most arbitrage episodes only give you the operator's side. You'll get both here, since Jeremy rents a duplex from Devin and runs it as an Airbnb. Devin's math is vacancy, speed and the next refinance, so leasing ahead of the May cycle was worth over $3,000 in one month and $6,000 across two. Jeremy's math is $20,000 of furniture, a six to seven month payback and no equity at the end of it. Before you pitch a landlord on a rent number, go check what that bedroom count actually earns in the market.

Key Points

• Devin's first deal in 2018 was a quad, bought for $875,000 with 20% down and about $50,000 of light rehab. Each unit rented for an average of $1,650, against a debt payment of roughly $3,400 a month before insurance and tax.
• The upside was a door to an unfinished fifth unit. He refinanced two years later on a community bank construction line, moved the property out of his personal name into an LLC, and financed the additional $240,000 to finish that unit. He's a little bit under $1.2 million all in and free cash flows about $3,000 a month.
• Devin had Jeremy in that duplex by March instead of waiting for the local leasing cycle that starts around May. Vacancy is like the devil, in his words, and those two months were worth over $3,000 in one month and $6,000 across two, plus refinancing that much sooner.
• Jeremy put $20,000 of furniture into the same duplex and took six to seven months just to earn his cash back. Devin got his cash back in the refinance and kept the equity, the principal paydown and the asset. Furniture, as Jeremy puts it, isn't an asset.
• Someone pitched Devin arbitrage at his $2,100 asking rent on a property where Jeremy had already told him $1,400 was the ceiling. That's $700 a month of loss, and Devin says he tunes out every future deal from a person who missed it that badly.
• In Durham, one and two bedrooms out-earn three bedrooms on the short term side, while the long term rent bump for that third bedroom is much bigger. So Devin already knows a three bedroom arbitrage pitch doesn't work, though four and five bedroom setups sometimes do.
• His rule before any offer is to go into the crawl space, because that's where you see what's actually going on with a house. If one is sitting on the market at a price that looks too good, chances are somebody already went down there and found the reason.

Full Transcript

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Jeremy: All right, guys. We are live with the Short-Term Rental Pros Podcast. Super excited to be here this week with my landlord. I've listened to a lot of podcasts in the short-term rental space and can't say I've ever heard anybody have their landlord on the phone, or one of their landlords, for that matter. So today will be a really interesting episode.

We're going to give you guys an inside look at a landlord's perspective, or a real estate investor developer's perspective, and what they see as a whole for the real estate climate, what they see in their market for themselves, and also how they work with people like myself in a mutually beneficial way to grow both of our businesses.

A lot of times, I feel like folks see arbitrage as potentially a one-side game, that somehow you're taking advantage of the landlord. But I'm going to be honest, guys, Devin's making a lot more money than me. So we're going to get into that and we're going to get into a lot more. I'm super hyped. Devin, thank you so much for joining today.

Devin: Thanks for having me.

Jeremy: Awesome. So Devin, just give us the background. Where are you from? How did you get into real estate as a whole? And just walk us through your progression as a real estate investor from the start to where you are today.

Devin: Yeah. So I grew up in Chapel Hill, North Carolina. Went to UNC. Go Heels. Right down the street.

Jeremy: Heels.

Devin: Yeah. So I've known you, Jeremy, for a little while now. I started working in finance after school. Had a non-compete that stopped me from doing various activities except for investing in real estate. So I had a little cash saved up after a few years. So in 2018, I purchased my first property.

From there, I needed a little bit of work. Met one of my business partners who has a construction background. And we started talking to each other, realized we have similar values and we could trust each other, which is very important. And we started buying some duplexes, fixing them up, renting them out, refinancing them and just growing it from there.

Eventually, we realized we have a service that we could provide to other people. So we started our own property management brokerage and unlimited license construction company, and have started helping others do what we've done, in terms of basically taking a side hustle and trying to make that their full-time gig.

Jeremy: Wow. So guys, I didn't mean to demean you, Devin, by calling you a landlord earlier. You are obviously a lot more than that. Devin actually wears all the hats in real estate. A, he's an investor. B, he actually owns or partially owns a brokerage. I'm actually a client of that brokerage, matter of fact. He also owns a construction company with, as he just said, an unlimited license, meaning they can build whatever the heck they want to. And he also owns a property management firm that specializes in long-term rentals.

So yeah, walk us through. So that first in 2018, you bought, that was the duplex, your first property. Walk us through that first one and that aha moment of, holy crap, I'm on to something here. I need to go balls to the wall and really go after this and turn it into something that I can turn into my living.

Devin: Yeah. So it was a quad. Interest rates were a little bit lower back then, but not as low as they eventually got. And I just kind of realized, just very basic math, this is what the long-term rental rate could be, at least on those four units, and this is what my mortgage would be. And so how do I just buy that, optimize it? I needed a little bit of work. Like Jeremy, you're very familiar with the property. It's the one next to Ponysaurus Brewing.

Jeremy: Oh, yeah. I'm very familiar with that. I'm on three of those four leases there.

Devin: Yeah. And so that particular transaction was relatively low risk and lower return, obviously, for that lower risk. It's just dipping my toes in. No real major rehab, just a little bit.

And I knew there was a potential upside because there was a door to a fifth unit that really was just like an empty habit, not even with flooring down or anything. And ultimately, years later, really how I optimized on that property is by turning that fifth unit into what our office is, where I am right now. And making it look...

Jeremy: It's beautiful. They did an extremely, extremely good job. Modern finishing, open floor concept.

So yeah, tell us, how much did that initial... Just walk us through the numbers, guys. And Devin, he's modest, but he's a math major. The numbers, Devin can do mental math, napkin math, on super complicated multi-unit transactions in like two seconds. I'm pretty good at math myself. I'm not going to boast. I'm not that good, but I'd say I'm pretty... almost an 800 SAT math guy, or 770 or whatever. But Devin's like a math phenom. So sometimes I don't even... I'm having trouble underwriting something, I just send it to Devin. Not for short-term rental purposes, but I also do look at the ARV value of things, and things that are more Devin's domain, I'll send it to him. And he's really the guy to go to. So walk us through the numbers on that first property.

Devin: Yeah. So the initial cost was 875,000, put 20% down. From there, it needed 50,000 or so of, you call it rehab, which is relatively light for a quad, appliances, tweaking some electric, putting some lights in here and there. And from there, I was able to rent each unit for an average of $1,650 a month. With my debt payment at the time, it was somewhere around $3,400 a month, not including insurance and tax.

From there, two years later, I refinanced that and basically got the construction line from a community bank, put the property out of my personal name into an LLC. And that helped me finance the additional $240,000 to finish up the fifth unit.

Jeremy: So today, what is that roughly?

Devin: The 875, that's another 300,000 of work. I'm in a little bit under 1.2 million. And of course, I've been taking cash out the whole time. Property's worth probably about 1.5. And I free cash flow after everything, call it 3,000 a month.

Jeremy: Got it. And his free cash flow, that's coming from my checking account right there. So Devin is making money. Devin is making money on the property. Not only is he making that long-term rental cash, but what he gets is that appreciation.

That initial, what'd you say, cost 875, you put 20% down. Let's just call it 175,000. Then you were able to refinance it. Now it's up to 1.5 million. You use that refi to pay for the construction that then got it to that 1.5 million. So it didn't come out of your pocket. I know you said 50 grand for that initial rehab. So 225-ish thousand investment has now went up to three quarters of a million. Again, Devin, you're the math guy here, but am I right with that math?

Devin: I'm certainly more than doubling my money in a five year period.

Jeremy: Okay. So pretty, pretty good. And since then, I mean, that was your first one. You've been able to take that strategy and that experience and you've just rinsed and repeat. I mean, to this point, how many deals have you done?

Devin: So we're in the 20s now. I would say our partnership is in the 20s.

Jeremy: Got it.

Devin: And personally, I've got this one also. And a lot of them are duplexes. So if we're just counting doors, it's more than 20 doors.

Jeremy: Yeah.

Devin: Like last year we bought a 16 unit complex. That's about to hit the market for rent.

Jeremy: Got it. So how many...

Devin: You can imagine the curve on that.

Jeremy: Sure. So how many doors are we at? I know a lot of people like to use the term doors. How many doors are we at?

Devin: A little bit over 50.

Jeremy: Okay. Got it. So 50 doors in five years, and Devin was... what were you at that point? Three years out of college, four years out of college or something? Got it. So he started five years, so 27. Now 10 years out of college, he has 50 doors. You have since went full-time. You quit that W2 job, correct?

Devin: Yeah.

Jeremy: And now your real estate portfolio, as well as the brokerage, in addition to the construction company, is your full-time gig.

Devin: Yes.

Jeremy: And just walk us through the synergies of having all these different avenues in your repertoire.

Devin: Yeah. So it's a major value for pretty much anybody I've talked to. I feel like as a potential customer or client, if you would like to talk to me. Understanding when you first look at a property, all of these components that go into how to analyze a deal that maybe has a little bit of air, whatever you want to call it. It needs some sort of construction piece.

I was just telling my wife the other day, never buy a property without going into the crawl space. But if you just talk to somebody on the street, how many people actually go in the crawl space when they're looking at a house to buy? And I can be that guy who goes...

Jeremy: Devin will climb into the crawl space for you. He's a wrestler. He's a former college wrestler. He will get his hands down and dirty for you.

Devin: Yeah, exactly. When you go in the crawl space, you can actually see what's going on with the property. I can go to somebody and say, hey, here's some problems I see. This is what it's going to cost you. You either be scared and run to the hills, or everybody else is going to be scared and run to the hills, this is the opportunity. If you're going to buy two properties this year, this should be one of them. And I can give that advice on the construction side.

I also have the ability and the employees who, if you want to sell that property after construction is completed or have us manage the property, we can handle that for you as well. And so you really get the full analysis, from the beginning of how do I even start talking to a lender, because of course real estate is extremely capital intensive to get the money, to the end point where it's like, okay, I have a stabilized property. I'm either going to sell it or I'm going to have somebody manage it, rent it out, and then refinance, or just at least start getting some of my cash back, because some debt actually automatically converts from the construction period into permanent financing. How do you get from A to Z? We can do it all.

Jeremy: There you go, too. He wears all the different hats, from wrestling into the crawl space to driving up in the nice realtor car. Devin himself doesn't drive the nice car, but he does have realtors on staff who will show up and drive the nice car and wear the nice outfit. Now, if you're watching this on YouTube, you guys can look at Devin's beard right now. I don't know, Devin, when was the last time you shaved that thing?

Devin: Shaved or trimmed, but shaved has been a year or two.

Jeremy: Gotcha.

Devin: This is the trimmed version.

Jeremy: Got it. So you guys are vertically integrated and I'll just walk us through, what is your plan for the future? And then I'll gear into the Airbnb aspect and our partnership and how that evolves. But yeah, what is your plan? What's future Devin working on?

Devin: Yes, we've gotten to the point, at least for ourselves, where we are finding infill opportunities, that certain areas, like Durham specifically, cities like Charlotte or Raleigh, they want some density. They want to maybe change what a neighborhood sort of looks like, and they are putting these rules in that allow for additional density in areas that otherwise were just for single family homes, where it's one house on half an acre.

And we are looking at those opportunities, buy the house, tear it down, put eight houses there. And having our ability where I have another partner who works strictly on development and permitting, we can basically do it all, where we are basically becoming sort of a medium-sized development company, where we're also doing the construction and then managing or selling the portfolio. So we're moving into those sorts of projects, looking at townhomes, really focused on cities in North Carolina.

Meanwhile, for other people, we are looking at rehabbing apartment complexes, but we also wouldn't do ourselves if it's a big enough apartment complex, like I mentioned. We just bought a 16 unit last year. But a lot of people who are just trying to get their foot in the door, they're like, okay, I'm renting right now. Can I buy a complex, fix it up, live in one side and rent out the other side? We will help somebody do that.

Jeremy: Got it. So you've kind of found your niche right now. And then some of you guys who probably follow real estate news are familiar that a lot of states, including North Carolina, are doing a huge push to allow ADUs, for example, in the backyards of properties. San Diego is notorious right now because they just made a rule where you can build essentially unlimited accessory dwelling units on your property, which is kind of crazy. If that were allowed in North Carolina, Devin would make millions of dollars on the spot. The next day, he would be building 25, 50 ADUs wherever he can.

But states, I mean, there's a huge affordable housing crisis right now. There's just not enough housing. That's really the core issue that we're facing. If you look at the real estate market as a whole, and you can talk about COVID, low interest rates, high interest rates, the whole locked-in effect, and the fact that people aren't selling their house. Really, and Devin, I'm curious if you agree with me, the main issue we have fundamentally is we did not build enough houses since 08-09. There's just more demand now. There's more people, more immigration. And we haven't built enough housing to accommodate that.

And really, states are just starting to catch on to that. They're late to the game. And they need people like Devin with the experience and the know-how to come in and take what was one house on a plot of land before and turn it into eight. That's what fixes the whole supply and demand issue we have. That's what gets rents down. That's what gives people the ability to find affordable housing, is developers building housing and government being a partner in that instead of an adversary. So I guess, hey, would you agree with that characterization of yourself?

Devin: If I wanted to wear a cape, I'd fly around, but... Yeah, you have a basic idea that construction costs to build a house is what it is. So the only thing you can really tweak at that point is what is your land cost? And the easiest way to tweak that land cost down is take an area that previously required half an acre to build a house and allow it to build four to eight houses on that area. You just decrease the cost and now make substantially more projects viable so that a developer will actually want to do the project.

Because otherwise, developers are just going to go to Raleigh, North Carolina, be inside the Beltline, and build $4,000 houses that they can sell for $3 million. And you can just do one or two of those a year, and you're probably pretty happy with your returns. Instead of focusing on middle-class housing, which is really what's needed in order to create the supply for the demand, especially in areas like cities in North Carolina, Durham, Charlotte, Raleigh, where there are just so many people moving here.

And even before the pandemic, when everything really energized, there was already too few houses on the market for the amount of people moving here. Then you factor in work from home and people just having a change in what their work-life balance looks like for them. And there are even more people moving here because, maybe I'm biased, but Durham is an awesome city if you're under 40 years old and want to be somewhere where it's happening.

Jeremy: So Devin's pitch to you guys is move to Durham, buy a duplex that needs work, live in one side, he'll renovate the other one for you. Then we'll build an ADU around back and you can move to another house and have three units that you're renting and do the same thing over and over again.

Devin: Yeah.

Jeremy: And then we're kind of joking, but I know mutual colleagues who are actually doing that currently and Devin is helping them do it. And they've made paper wealth. They've made hundreds of thousands of paper wealth in one to two years by doing that strategy.

Okay. So we've kind of talked about what you're doing, what you're specialized on. Now let's get into how we work together and how a landlord like yourself, how they see partnering with investors, business operators such as myself, in order to essentially occupy your list or occupy your apartments and your houses.

So first I want to say that the way Devin and I got reconnected, so we actually did know each other when we were kids. One of his buddies is my childhood best friend's brother. And we went to the beach together when I was, I was probably 10 and you were like 16, 15. And I was amazed because Devin was doing four by four, five by five Rubik's cubes, literally with his eyes closed. I kid you not.

So we got into Rubik's cubes, the three by three ones at that time. And when we couldn't do it, we were like, Devin, Devin, can you fix the Rubik's cube? So I knew Devin, but I don't think we even saw each other, talk to each other until COVID, unless you can remember, if in that case, I feel bad.

Devin: Yeah. I'm not exactly sure when we got back together, even though we [inaudible] UNC, I'm at least five years older than you. So we never interacted there.

Jeremy: Yeah. So I think what happened was Sean, your friend, my friend's brother, was an architect. And Andy was telling me that Sean was working with you to help architect some of these projects you were doing. And I was like, whoa, what's Devin doing? And Andy was like, I'm not sure, but he's doing a lot. He's doing a lot of different projects, which just got me intrigued.

And this was like early COVID. This was pretty early in my real estate investing journey. And I think I hit you up on LinkedIn, or I don't know, I just hit you up. I was like, Devin, I hear you're doing some cool things, man. You want to go grab a beer, something like that. Maybe I'm glamorizing this a little bit.

Devin: That sounds to me. Someone can give me up on LinkedIn for a beer.

Jeremy: Yeah. So we just met up. Devin literally just showed me the different projects he was working on. We probably went to like five of his different construction projects and he was just like, yeah, I mean, this is, I'm doing this here. This is what I think the rent's going to be. Do you yourself, or do you have anyone who wants to rent any of these? It was pretty much as simple as that.

And then one of the properties, a duplex, again, your duplex strategy. I was like, yeah, I think this one, I think... Again, this was even early for me in my Airbnb journey, so I'm not even as adept in where I am now. But I just had the feel that that property would be good.

And you were like, all right, well, it's yours, but you need to pretty much rent it as soon as I'm done with it because I need to get this thing refinanced ASAP, Rocky. And to me, that was a light bulb moment of, oh, investors like Devin, he's always looking at his next project and always trying to stretch. I don't know if stretch is the right word, but he's always playing the financing game. And the thing that's most important to him is having that signed lease in hand so he can go do his next project.

I mean, these projects, six months, 12 months construction, he might increase the value of them $100,000, $200,000. That's what makes him wake up in the morning, is the next deal, the next deal. So someone like me can be a partner and help him expedite the ability to do that next deal. Or what else do you like about me, I guess?

Devin: Yeah. I mean, that particular project, we were wrapping up around February, sometime like that. Wanted somebody in as soon as possible because any landlord hates vacancy. Vacancy is like the devil. And so it just made sense, instead of waiting, say, until the cycle around this area actually starts, which is around May, I can get two extra months of rent, which in this case is over $3,000. So you're talking about $6,000. Plus I can refinance and get that capital back two months early.

And all I have to do is talk to Jeremy, see what works for him. Even during the construction phase towards the end, when we're talking about curb appeal, things that he might need done to make this a viable Airbnb, I can do those on the front end instead of doing whatever I was going to do to make it a true long-term rental, and just do those tweaks to exactly what he wants on the front end. And my benefit, there's no vacancy. Jeremy is easy to work with. I just call him up if I have an issue. He can call me up if he has an issue. And that is something that I value. I think other landlords would.

I know there are a lot of other landlords who are like, oh, Airbnb, they're going to tear up my property. And it's like, well, not really, because Jeremy's a businessman who needs to make money. If somebody tore up his property, then he wouldn't be able to get the next guest in there. That's a problem. And I believe that you should be doing higher quality properties anyway. You're going to get higher quality tenants on the long-term side. So the same thing applies, that those are the sort of tenants that I want in there. Those sorts of guests are also the ones that they're going to take care of it if the property itself is a higher yielding Airbnb.

Jeremy: Got it. Yeah. And I say one thing that I thought was funny was that, so Devin, not every landlord has a construction business. Devin happens to have that. Which also, guys, I want to thank Devin for his service to the housing supply in the US by building. A lot of people are scared to build right now. Devin is not. He's not afraid.

So that being said, I think you had one client who was thinking about working with you and they wanted to see an example. And then you're like, hey, Jeremy, trying to get this person as a construction client, they want to see some of our recent work. Can they get in to see your property? And I think not only obviously he did a good job on the construction, but A, we make them look good. We designed these well. I don't know what your opinion is on our design, but we make them look good. And not only do we make them look good, we also want to keep them in good shape. They're always clean.

And we're both business people. Obviously, if we have guests there, we can't let someone in. But if we don't, it's a beneficial thing for you. I'm trying to help you. You're trying to help me. So we'll let them in. But yeah, I guess, have you shown clients our properties, or with our design, as kind of an example, not only from the construction side, but from a cosmetic side?

Devin: Yeah, definitely. I mean, there are definitely also people who, you talked about potential clients for me, I know you teach courses and you help manage these Airbnbs. Also, there are people that they don't necessarily want me to manage on the long-term side, but I can get a construction contract out of it. And for particular projects they're looking at, showing off that project, that duplex that you're in, it's a win-win for the two of us. You walk in there and basically they're just like, wow, I get it. This is feasible. These are not small ticket items. And to just have a situation where somebody just walks in and just gets it, because when you see it and you can touch it, it's a lot easier than looking at a spreadsheet. Having that sort of example is extremely helpful.

And I compare that to your long-term tenants. I have been in properties that in general, not even your properties, but just properties that were currently long-term rentals, as well as your properties that were currently long-term rentals. And what I have found is that a majority, at least in my experience, which I think I actually have a pretty decent sample size at this point, a majority of normal tenants. And again, these are even places that Durham, North Carolina is a nicer town, nicer city, rents are higher than definitely US average, but people are hoarders. People just have a lot of stuff.

It's like every time I walk in, I tour an apartment that's currently a long-term rental where folk are going to move out, they have crap everywhere. And you got to imagine the place of, all right, let's just ignore all this stuff. But a lot of people have trouble seeing past the crap, seeing past what someone's doing to a place. So being able to go into a place, or even show pictures of a listing online where there's nothing there, it's only furniture, it's only the fake plants, it's only the wall arts, it just probably gives people comfort in their mind, versus walking them through one of your long-term rentals where you really don't even know what's going to happen when you open the door.

Jeremy: Yeah, I agree. Yeah, especially like the students, you really don't know what you're going to walk into with students. Sometimes they haven't been there in a couple of weeks. There's trash usually everywhere. And it's not exactly how you would sell any service or product.

Devin: Got it. Mostly agree with exactly what you just said.

Jeremy: Got it. So we have a good, good partnership there.

So I'm trying to just think of, okay, and you're like, let's say, actually, so this is an example of the flip side. So people probably reach out to you a good bit, or reach out. I know at this point you have a property management firm, so they're probably not talking to you, but maybe they've seen what I'm doing. I know we're on this podcast right now, so I'm sure we'll see what happens after. But then they reach out to you and they go, oh, I want to Airbnb this house. Because I know you've sent me some where the numbers just don't work. I look at it, I'm just like, I mean, this isn't going to make... I mean, all signs point to this property not making money, and if any case, losing money.

I guess when people reach out to you with that pitch, what's the most important thing and why is it actually beneficial for them? People say, oh, well, the landlord, once they find out how much money you're making, they're going to do it themselves. Why is it actually beneficial? A, what's your reaction when people reach out, and why is it beneficial for them actually to make money?

Devin: You're talking about from the landlord perspective?

Jeremy: Yeah, exactly.

Devin: I'm not set up to do that. They see it as leaving dollars on the table, but you're talking about me setting up a whole new business venture, basically, which is a different risk profile. And everything with investing is risk assessment. It's a completely different risk profile.

Jeremy: I guess what you're answering right now is why don't you do it yourself? I'll just rephrase the question. Why don't you do it yourself?

Devin: There are problems with any business. That's what you're doing in business. You're solving problems. I'm not well-equipped to solve that particular problem. I'm well-equipped to solve a bunch of other problems, but running out of coffee for an Airbnb guest is not something I'm well-equipped for. Now, if the toilet gets clogged, I can have an accident within hours very easily. It's just a different profile.

When you talk about risk versus reward, it's just not there for me. It's much easier for me to de-risk what I'm doing, really, honestly, when you talk about low vacancy and a lock-in debt for a minimum of five years. I get an Airbnb arbitrage in there with you. That's locked in. Also, you'd agree for ideally a minimum of five years. It's a set it and forget it. I can move on to my next project and work on my construction where I'm making money, and my brokerage, and refinancing another project, instead of having to basically set up this next business arm. It's just not what I do.

Jeremy: Yeah. Buy $15,000, $20,000 worth of furniture. Work with designers to make sure it looks good. Work with furniture assemblers to make sure they're put together.

For you, to be frank, again, guys, I will say I've made good money the last few years. I'm definitely happy, but Devin's made a lot more money than me. I'm not ashamed to say that. Again, if he does these projects the way he underwrites them, he gets all of his cash back. Let's say it's a $300,000 project and he puts $100,000 in. When he does that refi, he's pulling all that cash out. That's how he underwrites his deals. He makes sure that every cent goes back into his pocket to then do the next one.

Am I mistaken? Isn't that your criteria? The way you underwrite is you want to make sure that when you do that refinance after the construction is done and you have a tenant like me in there, that you literally get every cent back?

Devin: If not, there better be a really good reason like, oh, this is actually just some portfolio in Greensboro where you're cash flowing so well. This is Greensboro, but otherwise, like the two plus we were talking about earlier, we pay $210,000 for that. We put $170,000 into it and it appraised for $535,000. We took 75% of the $535,000 cash flow.

Jeremy: Got it. Then on to the next one. You literally in that five, six months, talking to me in February, getting it rented a few months later, you are increasing your net worth by hundreds of thousands of dollars.

Devin: That was an August purchase and you were in there in March.

Jeremy: So in eight months, nine months, you on paper made a couple hundred thousand dollars.

Devin: Roughly 150.

Jeremy: Yeah. Yup. Okay. So he did that. Meanwhile, I've been renting it for several years and I will tell you, I have not netted 150. I mean, I would have to look to see what I've actually done, but it's nowhere near that. So it makes more sense for Devin just to focus on finding those and putting his time and energy into that side of things, versus setting up the logistics of an operation for that.

Because essentially I put 20 grand of furniture into that apartment, or that house. And my criteria is I want that paid back in eight months. So I put in 20 grand and I didn't even get my initial cash investment back for probably six, seven months. Whereas in that same eight month period, not only did Devin get his cash back, but he got that equity value. I didn't get any equity value. That furniture is not an asset. Some would argue it's a liability.

So in that six, seven months, I made my initial cash investment back. Meanwhile, he not only recouped his cash, but now he has an asset that is cash flowing. I'm paying him rent each month. I'm sure I'm paying you more than whatever the mortgage is. And B, that equity, that appreciation, it's gone up in value. You're paying down the mortgage each month. So that principal pay down, you're capturing all of those benefits, where I'm merely recouping monthly cashflow.

And guys, sometimes January, February, it might not even cashflow. That's the nature of seasonality. It does cashflow. I mean, I wouldn't be doing it if it didn't. But my point being is, why would a landlord allow this? Well, guys, a lot of landlords are making a lot of money and you can be a partner for them.

Again, I couldn't even get a loan probably when Devin and I started working together. Airbnb was like an arbitrage, and co-hosting was my way into the game. That was my way into the game. I couldn't get the financing. But now, a couple of years later, I've had that cashflow. I've had that revenue. I can show it on the books. I can show it to the IRS. I can show it to banks. Now I'm hitting Devin up as an investor, and I'm saying, and for example, I just, I bought a property with Devin, Devin's brokerage, probably what, like three months ago.

Devin: Yeah.

Jeremy: And I was about to put another offer in on another house this week, but apparently it just went under contract without us knowing that it was a competitive situation. Kind of bummed about that one. And that one would have needed work. That one would have needed a wall slammed in the middle out of it. So would have definitely hit up Devin on the construction side. So my point being, guys, is relationships. It's relationships are key.

Jeremy: Your situation today is not your situation tomorrow. You should definitely focus on what you're uniquely gifted at. But ultimately you want to own the asset long-term. I think that's something that me and Devin talked about early on. And it was really good for me to know what his goals and his objectives and missions were.

Devin, a lot of flippers just sell. And Devin has never been... have you ever sold anything?

Devin: No.

Jeremy: Devin doesn't sell. And why is that?

Devin: I mean, there's just some basics. If you think about who the wealthiest people are in the world, they are people who you find the project that works. It's a winner on the front end and winners continue to win. So do not sell. It's a leverageable asset, getting the deal in the first place, just take it, refinance if you have to, be patient, be disciplined.

That's way, way better than a lot of these guys now. Now interest rates are way up. They might be struggling a little if they were flippers. Some of them got stuck last year when the house value dipped 20%. They thought they were going to flip and make 15%, but instead they lost 5%. They were doing really, really well for three years and then a bad year happened.

Whereas with my property, so that duplex that Jeremy is doing his arbitrage on, I have a debt payment due, I have rent coming in, there's a little bit of spread on top and I get to eat lunch and dinner tomorrow without having to worry about where the money's coming from.

Jeremy: Exactly. And it's better to be the gatherer than the hunter. And in terms of relationships as a whole, I think it's really important. Real estate and just any type of business is a game of relationships.

Honestly, to be frank, the reason I'm comfortable... I do have other landlords and honestly, some of them, maybe I just haven't known them as long. I probably wouldn't feel comfortable having them on this podcast because we just, whatever, our relationship isn't in that place where I feel comfortable. But here, I trust, we're being very transparent where we're giving our... I mean, we're giving numbers on exact deals.

But again, I look at it as, I help Devin out. When I see a situation that is beneficial for him, I'm going to help him out. I'm going to give him a lead for whatever he's doing, throw it his way, vice versa. The first time when he has a new deal or opportunity, he's going to, or hopefully, I know you have, maybe you have some more deals, he's going to run it by me and give me the first look at it.

And 30, 20 years from now, we're going to look at where we are and be happy that we helped each other get there. So you got to look at things as a mutually beneficial thing. And that's why real estate and business is so great, because you can essentially, by helping someone else and adding value to them, you can receive. What goes around comes around. So I don't know if you echo that sentiment.

Devin: Yeah. I have monthly meetups both in Charlotte and Durham that our realty firm puts on, where we just go and we talk to other people and really all levels of experience, people who know nothing, who don't even have their first property, to other people who own apartment complexes. I have other builders there who I'm technically competing with, but I talk to them because we can learn from each other. We're in a similar environment, see what other people are up to, and networking is the way to get there.

I also think, I mean, that was something that, if I go back to business school at UNC, they teach you networking like day one, like how important it is. You really don't realize it at the time in college until you get out. But also, a component of that is you never know who anybody is going to be five, 10, 15 years from now. And you just don't burn the bridges.

I think about the help and advice that, I don't know, specific advice that maybe you got from entrepreneurship professors in college, but those guys, I mean, they're madly successful and they're just sort of around to give back. And like you said, if you believe in karma, it comes around. That's the way the people who taught me how to do business, that's how they're functioning. So that's why I do business that way. It's always just be open-minded to listening to people, to helping people if they're sincere, and don't burn any bridges.

Jeremy: Absolutely. Bridges are not meant to be burned. But also, and I'll give kudos to myself in this situation, I was a younger guy. I was probably, when I reconnected with you, I may have been 23, like just out of college, beginning of COVID. And I saw someone who, to be frank, I didn't know. You say we were friends, it was kind of a stretch. I hadn't talked to Devin, obviously didn't hate each other, but we hadn't talked or seen each other in more than a decade, but I just hit him up to grab a beer.

Again, I didn't even know exactly what would come from it. I didn't pitch him on Airbnb arbitrage. I didn't pitch him on co-hosting. I literally just hit him up and said, hey, are you around, or do you have time for a call? Do you have time to link up? And he just showed me around. It wasn't transactional. It was just, all right, yeah, I'd love to just show you around, show you what I'm doing. And from there, opportunistically figured out a way to get involved in what he was doing.

And so my recommendation for people listening to this who are looking to get into... it doesn't even have to be at this point, it doesn't have to be Airbnb arbitrage, it doesn't have to be co-hosting, it doesn't even have to be real estate as a whole. Whatever industry you want to do, just hit someone up. And you don't even have to vaguely know them. You don't have to have went on a beach trip when you were 10 years old with them. Literally anybody you see out there on LinkedIn, on Instagram, that's just doing something interesting and in a field where you want to be, send them a DM.

I mean, I would recommend trying to add value. And I did, I guess I did add value to you, I paid you monthly rent. That was what you needed at the time. But if I didn't have that, I may have been, hey, Devin, you need a project manager for your flips. If that was something that he actually, you did mention to me, that was something you were looking for at around that time. At that point, I was doing a boat rental business. I was also starting to take investor capital to go out and buy Airbnbs and doing more arbitrages. So that wasn't my vertical, I was doing something else. But if I hadn't been, when you told me that, I may have gone, sure, or not even sure. So resume Devin, let's do it.

So I guess, what would you say to someone who's looking to get into real estate and they're not sure how to start? There's all these different, there's Airbnb, Section 8, home flipping. I guess, what would you recommend to someone looking to start in 2023?

Devin: Do they already own their own place or are they renting?

Jeremy: They don't own. So let's say two cases. One, they have great conventional financing options. Two, they've got credit card debt, they're looking to just figure it out over the long run.

Devin: Yeah. So we'll go the easy route, the easy route one, depends on their risk tolerance. If they are low risk, they just go buy an already fixed up quad, live in one unit, rent out the other three.

Jeremy: The happy.

Devin: Yes.

Jeremy: How's that?

Devin: Basically. The one that I really prefer is somebody who's 24 years old looking for their first house and they may get something that's like two or three K loan, or they can actually rehab the house that they're going to live in. You go, you buy that, then you have six months to rehab the house before you have to move in it. You have to live in there a minimum of one year, but you could add a tremendous amount of value in getting that house, which also in this interest rate environment just might be the better way to go when you're talking about risk reward.

Jeremy: And then I guess the last round is they've got that left, bad credit, bad everything. How do you get in?

Devin: I think you need to just figure out a way to maybe get your real estate license, something like that. Get construction experience, getting an actual skill of some sort in real estate to just get your foot in the door.

Jeremy: Project manage for you. Yeah. Are you looking for project managers?

Devin: Not currently, but I'm going to, so I will soon. I'm always looking for real estate brokers who are young, aggressive and looking to just get deals done and get themselves a commission. There are other firms out there where you can be a real estate broker, and instead of taking actual cash compensation on a transaction, you can get equity in the deal. There are a few firms out there like that, but that's one way that that sort of person can actually get actual real estate with no capital. You just go and you find somebody with capital and you do the deal for them and you broker it and you get a little piece of that deal.

There are possibilities like that out there, but outside of that, really just get a skill. If you want to make more money, learn more skills. That's generally my... learn skills, you'll make more money.

Jeremy: Yeah. I might not be able to do, and I can't even do the mental math like Devin, but there is some skill out there that's for you, whatever it may be. And again, this is a short term rental podcast, but there's many high value skills out there. And if you want to get into real estate, maybe your route of getting there is getting the highest value skill possible, making as much, getting access to financing, and then hitting Devin up so he can take a single family lot and have you build a quadruplex with you that will provide generational wealth for your family.

So Devin, obviously you're doing a lot, doing a lot of deals. You have all these different companies now. I guess, what is your long-term goal? Devin, 30 years from now, where are you?

Devin: 30 years, I'm probably chilling on the beach or the mountains or something.

Jeremy: All right. 15 years, 10 years.

Devin: Yeah. It's about that financial independence where I don't have to worry or stress, really. I'm not a very materialistic person. I value my time. I obviously enjoy real estate. So I tell people I'm going to retire in a few years and they're like, well, what does retirement look like to you? I said, well, I'm still going to do deals. That doesn't sound very retire-y. It's different. I'm going to be choosier about who I work with and really only do a few deals. So I'll probably cut back on that. But ideally I've built a machine where there are a few key people running my business that they take my role right now, where they're going into the crawl space and they're getting...

Jeremy: Retirement for you means not going into the crawl spaces.

Devin: Pretty much.

Jeremy: Essentially what you're doing right now, but not going into the crawl space.

Devin: Yes.

Jeremy: Yeah. So someone who's looking to add value, you literally, all you gotta do is go into the crawl space for Devin's and make it so he doesn't have to do that.

Devin: Yeah. You have to learn what you're looking at in the crawl space. That's a pretty key skill there.

Jeremy: Devin, I will admit, I'm six foot three. I am not going into the crawl spaces. I do when I buy a place and it's painful. I don't know if I can do it for other people, man. I'm just saying you might have to count me out of the search for the crawl space. I'm sorry we can't do business in that regard.

Devin: Yeah. That's where I'm going to get to. Honestly, like wrestling coaching, I just started doing that again. I have more time for that. I'll do some of that. It comes down to that work-life balance, looking at starting a family relatively soon, I guess. We'll see. And where do you want to be at a certain age? For me, this is sort of the path on the timeline that I can choose more, with more control over what I'm getting to prioritize. And that's what real estate's at least... I'm not quite there yet to what I want to be, but I'm well on my way to getting to really prioritize my debt time and not my work time.

Jeremy: God. So you'll be on the hunt for less deals for me. Dang.

Devin: No, I'm not.

Jeremy: Let's not allow Devin to retire. So I'll stop looking for deals for me.

Okay. So I kind of asked this earlier, but I think I did a poor job of articulating it. You've mentioned to me before that when you put a listing online for rent, I mean, obviously arbitrage is hot nowadays, it's hot, especially with younger folk. Honestly, I was, I am now, I was a couple of years ago, they hit you up. And I guess what are some of the... like people who give a good pitch, what's their good pitch? And then those who don't give a good pitch, why isn't their pitch good?

Devin: Yeah. I think it comes down to experience. I think about it the same way that hard money lenders look at different people. It's like you go to the hard money lender, you're trying to get a loan, and the hard money lender is like, okay, show me your experience. Does your work speak for itself? For me, anytime I need a loan from a hard money guy, I'm just like, look, here's a refi I did a couple of years ago with nine properties on it. Give me the loan. I'm good for it. And that's how the hard money guys look at it too. Just show that you know what you're doing.

So I know for someone who's just trying to get in, I don't know if co-hosting is how they get in with you so that you can share your experience to actually convince the landlord that they have that experience. But otherwise it's very tough for me to know that somebody knows the numbers that actually go into getting the project complete, getting to the point where they are cashflow positive. That's the same concern that the hard money lender has. You have a property that needs to be fixed up. Do they have the construction experience to fix up the property to either sell the house or get a tenant in there and refinance?

The sort of way to prove it on the pitch is to be like, here's where I've done it already. For hard money lenders, usually you've done it twice. That's enough to prove it. I don't know exactly if there's a number like that for the Airbnb, but certainly at least once. If you haven't done it at all, being able to partner with somebody who has, or taking the plunge on your own, buy your own duplex and do it with the other side, the other unit, that can really show a potential landlord like, hey, this is how I know I can do it, because I'm doing it.

Otherwise, I know there are properties out there where people have come and pitched me on it. I already know. I spoke to Jeremy, that I'm asking $2,100 in rent and he's like, the most I can pay to make any money here is $1,400. So whoever is trying to do that deal is probably going to lose $700 a month if they go with [inaudible]. So if you come at me on that, I'm going to tune you out on every future deal too, because I knew you didn't know your numbers on the first one. So know your numbers.

Jeremy: I guess. So they have no experience, A, they have no experience, and B, they're just assuming that they can just kind of make money, which is, I think, I try to... know your numbers. I always say, know your numbers, know the variables. You need to know the variables. At the bare least, know how much the internet is. Do you know how much the internet costs in Durham, North Carolina? Because guys, I have rural properties where I'm spending $150 a month on Starlink, whereas in Durham there's several internet providers. But folk just kind of reach out and they don't actually understand the variables, and they might put themselves in a situation where they're literally losing money.

And Devin comes from that, again, he's relating it to a hard money lender where they're not going to give you money unless they know you're going to make money. They want you to make money because that's where they feel secure. So for you, you want to feel secure that that tenant, again, like you said earlier, five years, you have confidence that when we're going into a property, or I'm going into your property, I'm staying five years. I'm not staying one year and then calling it quits, because then it wouldn't be good for me. So you want someone who... and if they're losing money in year one, that kind of defeats the purpose, and they might be more likely to leave or to just stop paying rent or have some situation arise there.

So I guess, is that what happens when someone reaches out starry eyed and all excited and they don't have a track record? As well as, do you ask them like, how much do you think this property will make? I mean, I know you asked me, and I'll show you, I'll be like, here's the data that I'm looking at. This is how much I think it's going to make. I show you the numbers. Do they?

Devin: The truth is I already know if it works for an Airbnb or not by the time they've reached out, because I probably already talked to you, honestly. So I go like, hey, it doesn't work, otherwise I would be doing it already. So it's difficult for me personally on those particular cases, unless they get me before I even have a project that's like, buy a new build construction. Although honestly, new building Durham, it just wouldn't work for arbitrage because of the sort of rent I can get on the long term side.

Jeremy: Because you're also building for long term. At this point, you're building, I think we've talked about, you're kind of like buy boxes that like three, four bedroom townhouse, kind of like some shared driveway situation. Whereas in my experience, the properties I do with you that work for the most part have a private backyard that their dog can kind of run around, and that's the reason why things do well. And that's why when we worked together, we built a fence in the backyard, because that was the amenity that I saw that, hey, if we have this amenity, people would rather stay here than stay in a hotel downtown. You know?

Devin: Yeah. So there are markets specifically, knowing the market, this is a good point on knowing your market. I'm not the only Airbnb arbitrage I've talked to in the past. Everybody knows the two bedrooms, the one bedrooms in Durham, for whatever reason, they're more profitable than the three beds. Everybody will tell you, and I guess this is something you can pull from AirDNA, the three beds do not pull substantially more revenue than a two bed on a short term rental in Durham, North Carolina.

So when you talk about what a landlord is going to charge, it's going to say, well, I want more money for a three bed than a two bed. That just makes sense. And it does. The increase from the landlord perspective on the long term is substantially more than the increase on the short term rental side revenue going from the two beds to the three beds.

So that's another point when somebody reaches out to me and they're like, oh, I see this three bedroom house you have over here, I'd love to do Airbnb. And I'm like, I know it doesn't work. It just doesn't. The only thing that works in Durham was one and two beds, and then sometimes these larger four or five bedroom situations.

Jeremy: Which are totally different. Talking about knowing your market, knowing your clientele, the one to two bed and the four to five bed are completely different clientele. The one to two bed, you can get the folk, for example, at one of your quadplex right now, we have folk who are there because I think they are doing Wicked. Durham is hosting Wicked for a month, I guess DPAC, DPAC has Wicked for the month. So we have two separate Wicked actors renting different apartments, because they want an apartment for a month while they're traveling. So you get that monthly travel for one, two people.

But yeah, three bedrooms, you don't really get that. And you also don't really get that big family who's coming for graduation or coming to move their kids into college. You don't get that family reunion. So you got to know who is coming to a specific market. And you got to understand that four or five bedroom might be completely different than that one two bedroom.

And this for you is maybe not as pertinent, obviously. But for me, I want to know the clientele that I have going into something. I'm like, who am I dealing with here? What types of stays? I don't want that to be a mystery for myself. I don't want to be surprised by it. So I think it's really interesting that that's the same for you too. You want to know that the type of property that you're renting is actually going to get the type of clients. A, volume, obviously, you want it rented, you want your tenant make money so that you're confident they're going to pay their rent. But B, you probably want to know... I mean, for instance, you work right above the three apartments I'm renting from you. Do you have issues with our tenants? I guess, tell me, let's hear you clear the air.

Devin: From time to time, but I have issues with my long term tenants from time to time. So it's no real different. But it goes back to, on the long term side, the same questions are asked, like, who's going to live in this house? Would I live in this house? Those sorts of questions that you asked me something, you're looking at a deal.

I mean, one key thing is, for me, when I'm looking at something, it's like, are more people tomorrow going to want to live here than yesterday? And that's for when you're buying a property. I don't know, necessarily, if it's applicable for arbitrage. But if you are arbitraging and owning your own property, you might want to ask that question. Are more people going to want to stay here tomorrow than were staying here yesterday?

Jeremy: So would you say that's like population growth is kind of the variable that dictates that?

Devin: Yeah, I mean, and again, maybe I'm biased, but talk about these metrics, but Charlotte, Durham, they're over a 10 year period, they're up 20 plus percent in population.

Jeremy: Hey, I mean, I've only bought in Florida, North Carolina, places where, and different cities in North Carolina, to places where population growth is occurring. And I echo your reasoning for that. And for arbitrage, too, I'm less concerned about the population growth, I would say. It's really like supply and demand. I look at a market and say, is there more people coming from a short term basis like year over year? Is less people coming, that I'm like, yikes. And then is that supply going up so much where cause for concern. And unfortunately, it is in a lot of places. Supply for Airbnb, especially in the last year or two, has gone bonanza in a lot of places.

And that being said, that's why I want to make sure I'm making money on everything. And I'm not entering into things where I don't make money, because then you can't really do it anymore. And that's why it's good to work with people like myself, to help you understand how to analyze things and to use softwares like BNBCalc, so you can analyze things and run the numbers. I digress.

Let's get back to Devin. So Devin, what would you recommend? You touched earlier on your recommendation, getting a high value skill. Usually I ask people, what is a tangible tip for those looking to get into the short term rental game? I know you're quasi in the short term rental game, but let's just, what's your tangible tip for anyone looking to be successful in real estate, looking to have that financial freedom you talked about, looking to live their life on their own schedule?

Devin: Yeah. So you're going to need to get a loan. You should learn some basic personal finance. It's something that in America, it's not taught in school, but personal finance and how to get a loan is absurdly important for this. It's absurdly important for life in general. How to not rack up credit card debt, understand what your cost of financing is when you're doing certain activities and why. The last few years before rates really pop, why it was such an optimal time. My house, my personal primary, I have a 30 year loan at 2.75%.

Jeremy: Jealous.

Devin: Yeah, exactly. And that's because I bought that seven years ago. I refinanced twice since I bought the house, added solar panels, financed the solar panels and had solar panels paying for themselves, because I understood the finance component of it.

Jeremy: Wow. So you literally underwrote solar panels to see how much your electrical savings would be and how much that was relative to the debt service on the electrical monthly payments, or as the debt payments, the monthly loan debt payments.

Devin: Yeah. So it came with a deal on the financing of the solar panels, something like 4% over 20 years. But I knew after I added the solar panels, I could refinance my primary, including the solar panels, and bundle that all into the same loan.

Jeremy: Got it. Wow. So Devin is doing numbers on numbers on numbers here.

Devin: Plus there's a 30%, or at least at the time it was 30%, tax rebate.

Jeremy: Tax. Oh my gosh. All right. Devin's... we're playing 2D chess, he's playing 5D here.

Okay. So know your numbers, whatever you're doing. So if it's Airbnb, if it's personal finance, if it's your monthly, how much you make in a month and relative to what your credit card that is. Why is, yeah, why is credit card debt at 20% terrible? I've been reading, I don't know if you've been reading on it, on just how much credit card debt we have and how much credit card debt is increasing right now. It's honestly pretty frightening. And I think a lot of people don't really understand how giving American Express and Chase 20% is kind of like, I would say, robbery. To me, that's robbery.

Whereas you take a loan out to build a property with Devin, you're getting 7% debt, but that 7% debt is amortized. You're getting equity each month. You're creating a valuable asset. And if you're doing the duplex strategy and the house hacking he talked about earlier, you're also living there. So I think these are all really good points.

So yeah. So Devin, for those who are trying to reach out to you from construction, I hope people don't take this to reach out to Devin from an arbitrage standpoint. But I mean, actually, whatever, do it. I mean, he's already good. I'm probably getting referred to you. Yeah. But whatever. If folk want to reach out to you, how can they find you?

Devin: LinkedIn is probably the best way. I'm the only Devin Solow on the planet, as far as I know. So you should be able to just search my name and find me on LinkedIn. Go to our website. Call the office. You can get my phone number that way. Shoot me an email. Yeah. I'm relatively responsive and accessible, honestly.

Jeremy: He's very responsive. You won't be able to say that. Yeah. Devin and I used to just talk. Again, this was even pre the fact that we were doing deals together. He would talk 40 minutes about the state. And I guess I only have a couple of minutes here. But yeah, what is your opinion on the state of the economy, on the state of the housing market? I know you talked about you have some five-year debt.

Devin: I have a very little amount of five-year debt, I'm going to be honest. The ones we have in five-year adjustable, I'm getting rid of them. I'm just selling them. They've already gone up a lot in value. We only have two of those. And I'm actually only selling one. I digress.

Jeremy: Yeah. What is your opinion on the state of interest rates? The state is the real estate market. I know you are still active, but just what's your thoughts as a whole?

Devin: Yeah. There are still deals out there. You just got to find them. One good thing is just, there are people out there. We are buying in upstate New York. And there are deals in upstate New York. Look at how the deal works. It cash flows. And it's like, man, upstate New York, you're out of your mind. That breaks rule number one of real estate.

You just follow the rules. Location, location, location. Just buy it in the right location and you'll probably be okay. That trumps everything, even if you make a ton of other mistakes. I mean, the second rule, don't overpay. That's obvious. Don't overpay. And then I say don't be an idiot. But really it's, don't think that you're smarter than everybody else. You probably are. You're certainly not smarter than everybody else in aggregate as a market moves.

So when you are thinking about where to find these deals, and everybody else is running from the hills from a house, but it's such a great price, there's a reason for that. You're not, you don't see something.

Jeremy: Go into the crawl space.

Devin: Yeah. Somebody else probably went into the crawl space. Unless literally, if it's an auction. If it's on the market, somebody's not in the crawl space.

Jeremy: Devin has been there. He's already looked in that crawl space.

Devin: Exactly.

Jeremy: All right, guys, this episode is brought to you by crawl space, a place you should always go prior to making any transactions or offers on properties.

Well, Devin, thank you so much for coming today. Look forward to continuing to grow with you, seeing your portfolio grow, see you accomplish the ambitious goals of sitting on the beach and having someone go into crawl space for you. So yeah, guys, maybe I'll have Devin back. I want you to sip in some Mai Tais on the beach or in the mountains. And stay tuned until the next time, guys. This is Short Term Rental Pros. Devin, thank you again for coming.

Devin: Thanks for having me. I appreciate it.