Mike Baum owns only one rental property, however this one property alone has modified his life. It’s allowed him to develop into such an investing knowledgeable that he’s consistently being requested for his opinion on the BiggerPockets boards, and he gives a number of the most well-thought-out investing recommendation on the web. So why does he have only one rental property, and why doesn’t he develop utilizing his experience? The reply isn’t that apparent.
You wouldn’t understand it, however Mike is completely disabled. After overworking so exhausting that he ended up shedding his imaginative and prescient, he was positioned on incapacity for the remainder of his working profession. This excessive achiever was compelled to decelerate and discover one thing else that might exchange his day job. Shortly after his analysis, he discovered BiggerPockets and turned a household trip house right into a short-term rental.
Now, he’s bought techniques and processes that assist him self-manage with only a few complications, and he’ll in all probability preserve this property as his one and solely rental for all times. Why didn’t he “FOMO” in when everybody was gobbling up actual property in 2020? Why didn’t he develop his portfolio to develop into the following tycoon? Mike has some clear solutions for why he did what he did, and after listening to him, you would possibly change what you need, too.
Tony:Ho ho. We hope that you simply’re having a Holly Jolly and festive vacation season with the BiggerPockets Elves off tinkering to make even higher reveals for subsequent yr, we deliver you considered one of our favourite episodes from the BiggerPockets Actual Property Podcast. Now, on this present, we’ll hear from Mike Baum, who owns only one rental property, however this one property alone has modified his life. So why does he have only one rental property and why doesn’t he develop it utilizing his experience? Hear on to search out out why.
Dave:As actual property traders, there’s a query we all the time have to be wrestling with. Is now the suitable time to broaden our portfolios or ought to we be sitting again having fun with the portfolio we now have or being affected person and extra opportunistic about discovering offers? For lots of people who come on the present, both as visitors or hosts, the reply is that they need to all the time be increasing and rising and scaling. However for different traders, being content material with what they’ve is simply wonderful, even for years at a time. And immediately we’re speaking to an investor who has rigorously weighed all of the components. He’s carried out the evaluation, and he has chosen to maintain his portfolio actually as small as he presumably can. He has just one property. It’s very profitable, however he solely has one and he’s very educated. He is aware of all the things there’s to learn about actual property, however he’s simply stored it at that one property. And I used to be form of fascinated by this, and I believe there’s quite a bit that we may all be taught from this technique.Hey everybody, it’s Dave. Welcome to the BiggerPockets podcast. Each Monday we like to start out our week off by that includes a member of the BiggerPockets neighborhood and listening to about their investing journey. And immediately we’re listening to from an investor named Mike Baum. And enjoyable truth, Mike is definitely considered one of BiggerPockets neighborhood’s high discussion board contributors. He has spent over 10,000 hours on biggerpockets.com posting and serving to fellow traders find out about actual property. So in case you’re a frequent customer to our web site, you’ve in all probability seen his identify pop up, however Mike has quite a bit to share on high of simply what he does for the neighborhood already. And in immediately’s episode, I’m going to speak to Mike about how an sudden life change for Mike and a critical one began his journey in actual property. We’ll discuss how he chosen his most popular technique of short-term leases and likewise why Mike has chosen to maintain his portfolio small and the way not investing could be an lively and strategic choice. And that is going to be an amazing episode as a result of I believe it gives a extremely useful and attention-grabbing counter narrative to what we hear mostly in the true property investing business. And I get it. Not everybody needs to remain small, not everybody needs to scale, however I believe it’s actually useful for all of us to be taught from people who find themselves doing one thing somewhat bit totally different. And Mike matches that invoice completely. So let’s deliver ’em on.
Mike:Mike, welcome to the present. Thanks for
Dave:Being right here.
Mike:Thanks for having me, guys.
Dave:Effectively, I’m very curious to listen to about your journey. And so let’s simply begin along with your profession. Previous to turning into an actual property investor, what have been you as much as?
Mike:So I used to be a engineer at Intel for 19 years. I used to be a product proprietor and what they name a technical advertising man. So what I did was work with our IBM or Lenovo with a few of these platforms and assist them combine our know-how and supported our subject gross sales employees. Plus I did demonstrations all around the nation on stage and present prep and did reveals and stuff like that. After which I did a ton of movies and the way tos and wrote a ton of technical paperwork. In order that was my gig. Wow. Yeah. And I did that till 2011 once I had an enormous enterprise, was working 70 hours every week, really slept within the sofa in our lab, simply go, go, go, go, go to get a product launch accomplished. After which one morning I awoke and I couldn’t see. The following morning I may see, however I had one eye pointing up this fashion and one eye pointing this fashion, and it was a sixth and a 3rd cranial nerve palsy. In order that was the primary indication. The stress of the work had put me over the sting. So principally Intel put me on incapacity quick time period, after which after a few yr of, there was no enchancment. There by no means actually is in a neurological degeneration. You possibly can form of arrest it as a lot as you possibly can, however you possibly can’t deliver it again to the place it was. So that they put me on full-time incapacity, and that’s been 13 years now.
Dave:Effectively, I’m sorry to listen to that. It feels like fairly an ordeal. So did that imply you have been left with out an revenue in spite of everything of that?
Mike:Yep. For me, sure. I imply, it’s not that we didn’t have any revenue. Intel has an excellent caring for their workers, so there’s a very good strong long-term incapacity plan. And naturally it requires that I join Social safety incapacity, which I did. So yeah, I’m on incapacity. It was a reasonably drastic revenue discount. My spouse is working, so that’s good. So it’s not like we’re broke, however we actually went from higher center class to center class, I suppose you might say. We have been by no means wealthy,
Dave:I’m positive as a change financially, however simply emotionally and psychologically, that’s like a giant simply life shift to being somebody who’s working actually exhausting to having to handle your output in a extra concerted means at this level. Is that if you found property or began eager about actual
Mike:Property? We’ve had just a few rental homes we’ve purchased and bought some stuff over time. Our trip leases situated in Coeur d’Alene, Idaho on Lake Coeur. And I’ve all the time needed, I grew up there, all the time needed to have a lake home, and a bunch of issues form of lined up for us to have the ability to afford to purchase this home on the lake. And it was a means for us to interchange, not contributing to retirement any longer as a result of I’ve no solution to, in regular methods, there are particular methods, however for essentially the most half it’s very tough to, if you’re on incapacity, you don’t have an precise earned revenue anymore, so you bought to do one thing for retirement. So I figured, and initially we weren’t going to lease the home, we weren’t going to do a short-term rental. And principally BiggerPockets is what turned me throughout to that. I’ve three children, we now have three children and we now have three grandkids now. So we figured, oh, we’ll have this lake home and we are able to go and all dangle on the market, however I got here to appreciate it’s going to sit down empty 80% of the time. It’s eight hour drive from the place we’re at to get there. It’s not one thing you possibly can simply form of bop on over. And touring with grandkids is actually not straightforward for his or her age toPick up, pack up and drive eight hours throughout the state to get there. It’s simpler now that they’re older, however again then it was, they have been very younger. And what yr was this? 2017.
Dave:Okay. So that you, for some time after your analysis, had it bought into actual property, it took a pair years so that you can begin?
Mike:Yeah, nicely, we had a few long-term leases we had bought.
Dave:Okay.
Mike:Yeah, so I imply, it’s not that we have been utterly inexperienced, however by no means actually checked out short-term leases in 2017. It was form of, that wasn’t say the wild, wild west of short-term leases, however it was a distinct world than it’s immediately. So I imply, I bought to get to know Luke Carl and Avery Carl on BiggerPockets. We joined, I believe I joined somewhat after they did. And I began hanging out on the BiggerPockets short-term rental discussion board and was studying all the things I presumably may about doing this. And we have been somewhat nervous. I imply, if you’re first eager about doing a short-term rental, you have got this asset as such as you’re principally handing the keys over. It’s not a 1973 Toyota Corona, you’re letting your buddy borrow. It’s a complete home sitting on the lake crammed with furnishings. And after we bought began, the home was utterly empty, so we needed to furnish it and get all of it able to go. And that took a very long time, probably not that lengthy, however it’s an expense and making an attempt to determine all of it out. But when it wasn’t for BiggerPockets, I don’t suppose I’d’ve carried out it.
Dave:Effectively, we’re glad to listen to that and also you’ve paid us again in spades as a result of as I discussed on the high the present, Mike is without doubt one of the most prolific members of the BiggerPockets Discussion board communities, which we significantly recognize. You’re all the time in there answering folks’s questions. We bought to take a fast break, however stick round as a result of later within the present Mike’s going to clarify why he’s virtually proof against fomo or worry of lacking out, and it’s tremendous attention-grabbing. So stick round. We’re again with investor Mike F. So what was the training curve like for you? As a result of I think about going from being in product growth and software program engineering, are there overlaps between that and managing a short-term rental?
Mike:There’s as a result of 50% of my job at the least, was creating processes for those that wanted to know how one can implement our know-how. So you actually simply take that and also you apply it to processes for short-term rental. I’m an enormous believer in self-management of your short-term rental, however you must have all of your geese in a row. You need to have all the things working. You need to be certain your upkeep schedule is on proper, on the cash as a result of the very last thing you need is that this X, Y, or Z breaking down. So all of your exhausting techniques have to have regular upkeep. It’s essential rent the suitable folks to be a useful particular person to return over and deal with one thing. So you must have someone there. You need to have a top-notch cleaner. And generally it’s going to take some time. I’ve been via 4 cleaners since we began.
Dave:That’s really not that dangerous. I believe I’ve been to far more,
Mike:It isn’t that dangerous contemplating we’re actually rural. I imply, we’re 36 miles down the lake from Coeur over an hour to drive down there. And it’s a tiny little city and there’s only a few professionals of this sort. There’s one other city about 18 miles farther south referred to as St. Mary’s that has some, however the cleaner comes all the best way from Coeur d’Alene. It’s a complete day job for her. Drive down there, clear the entire home, high to backside, do all of the laundry, after which drive again. In order that’s all the time the important thing, however getting all all the things in place and all of the processes in place, as soon as these are operating, then administration turns into quite a bit simpler. I’m an enormous believer in private communication with the visitors. I don’t depend on automated communication. I don’t depend on bots of any variety to reply issues. Anyone asks a query, does an inquiry on Airbnb or VRB on the man who solutions the query, I give them my private cellphone quantity that they’ll get ahold of me anytime and I can depend on one hand the quantity of instances I’ve been contacted for issues.
Dave:Actually?
Mike:Yeah. It’s been seven years.
Dave:Is that as a result of the home is simply in nice situation otherwise you discover nice visitors?
Mike:Each. I believe I vet each visitor. We shouldn’t have auto e book turned on for anyone. Everyone has to speak to me and I bought to get a really feel for they’re. We get plenty of pretend bookings.
Dave:Actually.
Mike:Hello, that is Steve. We’re staying at your own home. Are these dates accessible? You possibly can virtually hear it and it’s apparent the dates can be found. We had one simply come within the different day, November 1st via the twenty sixth. I’m like, wow, that’d be an amazing reserving. I’ve solely had two bookings that lengthy ever that have been actual, however I knew immediately due to the wording. After which it takes them a few week and a half to get again to me once I say sure, nice. My spouse and I and youngsters are going to be happening a trip and my enterprise goes to be paying for it. Can I please ship you this pretend third celebration out of nation test?
Dave:Oh gosh,
Mike:Give me all of your private info so we are able to make this occur. Yay. And also you’re like, Nope, solely work via the device. I solely take funds via the device. Sorry. After which they disappear.
Dave:Good for you. I imply, it sounds such as you’ve bought some actually good techniques in place. I need to take a step again shortly although, since you’re form of in your timeline. You purchased this home for private use, you discovered BiggerPockets, and I believe one of many frequent challenges that plenty of our viewers right here is how lengthy do you analysis and be taught earlier than simply leaping in? Was it fast so that you can simply begin renting it out or are you extra the kind that spent plenty of time educating your self previous to, such as you mentioned, handing over the keys to this very precious asset to folks you’ve by no means met earlier than?
Mike:Proper. So evaluation paralysis might be the largest hurdle for most people who’ve by no means carried out something like this earlier than. It’s a gigantic expense for most individuals, and it’s an actual threat and function of the ds. So I’m each side of that. What you simply acknowledged, as a result of I’m not threat averse, however I plan, plan, plan. If you happen to fail to plan, plan to fail, you have a look at all the things, you learn all the things. And I used to be had a bonus being disabled. I principally had time so I may be taught all the things there was to be taught. And being extra technical minded, it principally permits me to get a greater understanding of the best way finance is meant to work and the way insurance coverage goes to play out. And I’ve a few algorithms that I’ve written that hunt the net which are for information that that’s why I can submit Mike’s offers of the day as a result of I scrub, I can scrub the web by myself and discover stuff that takes some time to develop into public to all people else. That’s why BiggerPockets, and I hate to maintain coming again to that. I’m not making an attempt to be a shill for BiggerPockets right here, however that discussion board is so precious as a result of there’s so many people on there which have carried out this and been doing it. And when you have a query, I can reply that query or John Underwood may reply that query or a dozen different folks can reply that query.
Dave:Effectively, to begin with, Mike, if you wish to be a shill for BiggerPockets, you’re in the suitable place. That is the one podcast you’re in all probability allowed to shill BiggerPocketsAs a lot as you need. We actually recognize it. However simply so everybody is aware of, what Mike is speaking about is a totally free useful resource to everybody. The boards are free. If you wish to be taught one thing about actual property, go ask a query. I believe there are lots of people who take heed to this podcast who don’t even know we now have these boards. Go test it out, ask a query, go see what different questions persons are asking. I promise you’re going to be taught one thing. And I believe you’re proper, Mike, I needed to simply get again to this concept of discovering the suitable stability between preparation and worry. Everybody’s going to have some worry. That’s only a regular a part of it, however you must discover the suitable degree and the suitable solution to reduce it off and say, educating myself just isn’t going to assist me anymore as soon as I’ve spent dozens or lots of of hours, no matter it’s, studying and studying, listening to the podcast at a sure level, you simply form of have to leap in. And it sounds such as you did that and have been you profitable immediately or did it take some time for your corporation to
Mike:It’s going to take some time.
Dave:Yeah.
Mike:How lengthy? The primary yr was lean, we misplaced cash the primary yr as a result of I used to be somewhat hesitant. We’re getting the home arrange, we’re filling the home with all types of latest stuff and I need to be sure that it really works. I went via two various kinds of sheets earlier than settled on a sheet model that labored actually, rather well as a result of the primary one, actually smooth, tremendous good satine weave sheets that the primary particular person with heels that have been form of wanted some work on as a result of they have been sandals on a regular basis, pour the heck out of the sheets.
Dave:Oh gosh.
Mike:They have been peeled up, you wouldn’t consider. So I needed to toss ’em out after one keep, issues like that. So your first yr, anyone who’s going to do a short-term rental, your first yr might be going to be on the lean facet. My space has bought low saturation on Lake Coeur. There are usually not plenty of locations for lease on the lake. I’ve dozens of individuals in competitors, not 1000’s. So I worth all the things accordingly. However even then you possibly can have a tough yr. So that you simply actually by no means 100% all of your evaluation and all of your ideas and air DNA and the enemy technique and going via and evaluating all the things, making an attempt to set your costs and determining your occupancy and ensuring you have got the suitable facilities and the suitable stuff in the home isn’t a assure that you simply’re simply going to knock it out of the park. So you must go into it with a understanding that that is one thing that you might do lower than break even. However like something, no threat, no reward.
Dave:Completely. And it feels like Mike, you bought collectively fairly shortly, I imply comparatively shortly and in 2017, and by all accounts, from what we’ve talked about, you’ve run a profitable short-term rental enterprise. However one of many major causes I used to be so excited to speak to you, Mike, is that you’re clearly very captivated with actual property and about short-term leases. You’re on the boards on a regular basis. I can hear it in your voice, however you’ve additionally chosen to not scale your portfolio. You could have one short-term rental and also you’re pleased with that. Inform me why you’ve made that call.
Mike:So we now have tried to purchase just a few different locations. Sadly, because the farther down the highway after Covid is after we actually beginning to look nicely, the rates of interest went nuts, and that was loopy. And property values went up and property values in our space, we have been selecting to do our investing in Idaho. Shot via the roof. I imply, it was one of many highest within the nation.
Dave:Oh yeah. I imply, for everybody listening, in case you are not conscious, locations like quarterly and Boise simply had a number of the quickest appreciation in the entire nation, was form of going loopy throughout that point. However Idaho would possibly’ve been the epicenter. Idaho and Austin I believe have been the 2 locations that have been simply booming much more than the remainder of the nation. So sorry to interrupt, however go forward
Mike:Matt. No, no, that’s okay. Yeah, completely. Our home are Lakehouse is value 4 instances what we paid for it now.
Dave:Oh my God. In seven years.
Mike:Yeah.
Dave:So yeah, why purchase poor in case you’re doing it that nicely along with your first one?
Mike:Effectively, we’ve checked out different locations. We did a scouting journey right down to Sedona, Arizona, trying round there, we went out to New Mexico, angel Fireplace, checked out some issues like that and all. We favored all of it, however sadly the locations that we favored one of the best ended up both promoting earlier than we even bought house, began speaking about it. They bought pulled off the market or there was numerous totally different causes. We took out a reasonably good measurement HELOC on our major. So we now have money for down fee and to get the home all prepped, and now we’re form of in a holding sample, however we discovered a spot out on the ocean that we have been . It was a profitable short-term rental. It was doing fairly nicely, and we have been prepared to tug the set off on. It wanted some updating, however we have been prepared for that.After which the folks pulled it off the market. That was late final yr. So we checked out a pair different locations, one in Coeur d’Alene, it was on a ponder river, which is a significant influx into Lake Ponderay, which is a gigantic lake north of the place we’re at. And it was stunning. It was nice. They usually pulled it off the market as nicely. So it’s not that we don’t need to broaden it, however now we’re attending to the purpose the place my spouse’s going to retire in a few years, and we began form of late in life on this specific sport. So had we identified extra earlier, I believe we might’ve carried out higher. If you happen to’re youthful, I believe there’s much more, nonetheless going to be much more alternative transferring ahead. It’s a extra subtle market now than it was seven, eight years in the past. So,
Dave:All proper. We bought to take a pause for some advertisements, however we’ll be again with this week’s investor story on the opposite facet. Let’s get again to the present. Has it been exhausting, Mike, to be affected person? A lot has gone on within the final couple of years. What’s it wish to take the affected person method?
Mike:Effectively, you recognize what? I’m probably not a lot of a FOMO man. Concern of lacking out. It occurs now and again that I get pissed off, however for essentially the most half, I have a look at it like, nicely, you recognize what? It simply wasn’t meant to be, so I’m not going to fret about it. I’m simply going to maneuver on and see what else I discover. I nonetheless scan. I spend really plenty of time on Craigslist purchase proprietor stuff and what folks have been making an attempt to promote. I’ve been driving round north Idaho fairly a bit, down again roads, seeing if there’s one thing attention-grabbing, simply form of floating round and I’ll write an handle down. Nothing’s popped up, however in case you get mad and attempt to bounce on each single deal that comes alongside, it’s going to chunk you, in my view. Finally it’s going to chunk you. You actually bought to look at that.
Dave:And what do you attribute that lack of FOMO to? I imply, I believe it takes confidence to not be jealous or operating, chasing each little shiny object. How do you keep disciplined?
Mike:Effectively, I must say that it’s simpler for me being somebody who’s older than, I imply many of the traders that are available which are asking questions, they’re of their twenties, twenties and early thirties, husband and spouse or a single particular person making an attempt to get began as a result of they like the concept of short-term leases. And once I was youthful, I used to be in all probability far more aggressive than I’d be. Now, we now have to plan for retirement. We are able to’t be, you have got that looming over your head your complete time. Do I sit there and I simply take $200,000 and put it down on black? As a result of generally you are feeling like that’s what you’re doing. You’re placing all of it on black,Hoping that it’s going to pay out in the long run. Now, it’s not like that, however each actual property deal is a little bit of a bet. You possibly can plan and you may get processed, you are able to do all types of issues and you might nonetheless lose and no person needs to lose. We noticed plenty of that in the previous couple of years. I believe issues have evened out now. So expertise and simply life generally and seeing issues come and go and are available and go, and your life isn’t worse since you didn’t bounce on this otherwise you didn’t bounce on that. I imply, I don’t spend plenty of time kicking myself within the butt for not shopping for Apple at $25.
Dave:Proper? Yeah. That wasn’t the a part of life you have been in
Mike:Proper at the moment. I simply don’t give it some thought. We get fairly just a few younger people coming in. They need to do short-term leases. Off the bat, they’re single. And my recommendation to each younger investor eager to get began is to not do short-term leases.
Dave:Oh, actually? Why is that?
Mike:Effectively, as a result of there are higher choices to construct a base off of.There was one younger man, he’s 19, he’s within the navy. He’s going to have the ability to make the most of VA loans and he needs to get into short-term leases as soon as he will get out in about three years. And I informed him, what it’s best to actually do is make the most of the VA mortgage, or for individuals who don’t have entry to VA mortgage can be FHA low down 3% down loans, purchase a duplex, purchase a triplex, purchase a fourplex. You purchase one thing like that. You reside in a single and you’ve got three renters. You do some minor rehab, you do it after a yr, you must reside within the place for a yr. Then you definately principally exit the place, lease that final unit, after which do it over again. You need to convert that one FHA mortgage to a traditional, you refinance. Then you definately transfer over right here and also you do it once more, and then you definitely do it once more and perhaps yet one more time.And now you’ve bought duplexes, triplexes, and fourplexes, all of them producing all of them, revenue producing for you, perhaps 10, 15, 20% at this level. After doing it for just a few years, perhaps you have got one which’s paid off. You could have all these property that kind this actually, very nice piece of bedrock which you could construct the remainder. So in case you’re younger, you don’t have children, you possibly can transfer each couple of years or each different yr or no matter with out dragging a complete household and altering college districts and blah, blah, blah, blah, blah. Then that’s what I’d do. After which when you do 4 or 5 years of that, then you can begin another issues.
Dave:You’re talking my language. I imply, that’s form of what I did is simply began with long-term leases. And over time I’ve branched out. I began investing in syndications. I do some personal lending. Now you do some totally different stuff, however I really feel comfy taking threat as a result of I’ve a strong portfolio of low threat, excessive performing property. And never all of them have been wonderful once I first purchased them, however I purchased 10, 15 years in the past. And that’s the great thing about actual property is over time you maintain onto these items, they carry out.
Mike:Yep.
Dave:Effectively, Mike, I needed to say thanks as a result of I’ve solely been internet hosting this podcast for just a few months, however I’ve been a member of the BiggerPockets neighborhood for a very long time, an worker for a very long time. And it’s truthfully, folks such as you who select to share their time and share their data with folks at no cost out of the goodness of their coronary heart, that it’s made the neighborhood so robust. So I simply needed to personally thanks. Thanks. So final query, Mike, what are you enthusiastic about within the short-term rental or actual property business proper now?
Mike:I believe there’s plenty of alternative available, sadly, on the expense of parents that have been overzealous of their FOMO purchases of short-term leases. I suppose you might say. Generally you possibly can virtually really feel the desperation of some people simply to get out from beneath that mortgage as a result of they purchased excessive on the high of the market. Their rate of interest is loopy. Rates of interest are beginning to drop. I believe we’re going to see a pair extra drops within the subsequent few months. I believe it’s going to be a really attention-grabbing 2025.
Dave:Yeah, likewise. Effectively, Mike, thanks a lot for sharing your story and your insights with it. We actually recognize it. And if you wish to join with Mike, we’ll put his contact info, however simply go take a look at the BiggerPockets boards. You’ll see him all around the BiggerPockets neighborhood. Thanks once more, Mike.
Mike:Thanks. Have a very good day guys.
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