The Exchanges

Q bought for 350 grand, put 20% down to avoid PMI to increase, again, monthly cash flow. So you put about 70 grand down, you're gonna make about 20 grand cash here in 2016. Um, what is driven? I mean, first off, talk to me about vacancies. So did you rent it the full time or did you live in it for a bit and then you rent it other times?

A Well, it's funny because I wanted to split time between Austin and San Diego, and I thought I'd be in San Diego about a third of the time, and then I just put it up on every day. And we, the last two months, so it's only been a couple months, we've rented out like 28 and 27, 31 days. So our occupancy rate's about 90%, which is higher. Um, and then once you get to super host status, which I'm close to getting, um, then the geography rate, you're twice as much, quite as twice as a chance of renting your place out if you're a super host, because then they basically advertise for you. Kind of like on Amazon, you become a quote unquote bestseller. Amazon starts advertising for you. So if you can become a super host, then Airbnb just starts. You can get more for your properties. And, you know, 80% of everybody that has a listing at Airbnb aren't doing it for business. You know, they have an extra room, they're going out of, you know, the country or the state for a weekend, they're just trying to get extra capital, but looking at it as an investment. Getting 35% return on capital in a year is unbelievable cash flow.

AI assessment note: “we've rented out like 28 and 27, 31 days. So our occupancy rate's about 90%”

Q Hold on, hold on. How'd you get that Andrew? Early on before you had any credibility, how'd you get that half a quarter of a million bucks?

A I graduated from school. I went through a clerk to trade program. I graduated from the University of Illinois, Champaign, Urbana. They put you through a clerk to trade program. They teach you how to trade about nine months to a year, make like two grand a month. And then hopefully you get the opportunity to trade. And then they back you with their money because they're going to upcharge your commissions. Um, they're going to also, you know, take a percentage of the profit. So I just started slow, started building it up. And unfortunately, you know, I traded on the trading floor in Chicago. The Chicago board office has changed for 10 years. There's not really any traders left anymore. It's all electronically. Um, traded. So it's not what it was back then. And then I had two, you know, really good years in 2007 and 2008, um, where basically, you know, the market was going down every day and the world was crumbling and, you know, yeah, I did really well. And then, and then, you know, trading is harder because not every year is going to be a profitable year. I've had a couple of years where I've lost money. Um, but you know, that's about probably about five million dollars.

AI assessment note: “They put you through a clerk to trade program. And then they back you with their money”

Q So let's talk about the risks associated with that cash flow. So you obviously can't control local governments, and we always see crazy stuff happening with the sharing economy and government officials that want to, you know, tout how powerful they are putting kind of constraints there. Is there any risk of that in San Diego? And if so, how do you measure it?

A Um, there are a lot of, um, so San Diego per se, um, you know, it's not illegal, but it's not HOA friendly. So most buildings in San Diego, you cannot do it because your HOA won't allow it. So getting standalone units, um, is a way to get around that because they don't have HOAs. There was one that just sold in little Italy and I was too slow on the trigger for about 750,000 and that would have been HOA friendly. A lot of places aren't HOA friendly and you know, they're trying to Do the short-term ban, and then San Diego actually just got declined. So they're trying to ban all short-term rentals in San Diego, and that did not pass. Doesn't mean it can't pass in the future. Your biggest risk is the short-term bill passing in a certain city. It got passed in New York, um, and in San Francisco. Now, uh, Airbnb suing San Francisco, the city that they started in. So that's the risk. But, you know, from my point of view, you can take advantage of this cash flow situation until you I can't. Okay. And worst comes to worst, they ban short-term rentals. What do you do? We still own the unit. So maybe it's a year, two, three, five years down the road, but once you have the unit, you can either do a long-term rental, which you're not going to get that, that, uh, you know, return on investment of 35% a year. Yeah. You'll get maybe, you'll make a little bit, um, or also you can do is you can…

AI assessment note: “they're trying to ban all short-term rentals in San Diego, and that did not pass.”

Q Yeah, I like that you don't kind of put, or speculate appreciation into these pro formas when you're doing the analysis. That can just be icing on the cake, right? Um, yeah. So, okay, so, so you've done the one deal in San Diego. Have you done any others?

A Uh, I'm currently working on a second deal. Um, and once I do basically prove a concept that it's doable and it's workable, um, I'm probably going to start looking to take investors on and raise a fund. Um, and then, I mean, my subscriber base on my trading business is huge, and I have a lot of, I have a customer base that's 40 to 60 and have a lot of money parked away. And you know, the big question I get, you know, I'm a trader, so I trade full time. Um, people always ask, you know, what do you do with your conservative money? Like, How many people like have money in the bank, especially when you're older, like a couple 100,000, a million dollars in the bank, who died to get five percent in the month right now. You know, most people part their money in the ten-year usually, and that's 1.7%. So these alternative investments are really interesting. So I'm going to do another proof of concept on another unit, make sure the cash flow is working out well, and then I'm basically going to write a book on Airbnb, which I started working on, because there's not really that much knowledge on Airbnb. Um, they had the Airbnb open, uh, in LA in two weeks. And unfortunately I can't make it that speaking engagement in Vegas.

AI assessment note: “I'm currently working on a second deal.”