Kyle Stanley - The Fearless Investor
LISTEN TO THE FULL EPISODE ON:
Kyle Stanley was originally a sports broadcaster and decided to get into real estate to be able to control his destiny and live the life he wanted. He now manages around 50 short-term rental properties in the Fresno, CA market through arbitrage and co-hosting strategies. He turned it into a 6-figure business in year 1 and got to 7-figures by year 2. He's also the host of The Fearless Investor Podcast, where he discusses the short-term rental market, generating passive income, and scaling your business. He also recently launched another podcast called The Setup Man, where he dives deep into the lives of current and former Major League Baseball players and coaches.
In this episode hosted by Mike Swenson, we discussed:
- Build wealth through real estate investing - Discover the secrets to starting your real estate journey, and unlock the potential for financial freedom.
- Unlock the profitability of short-term rentals - Learn how to maximize your earnings and tap into the booming market of vacation and short-term rentals.
- Overcome fear and take the leap into entrepreneurship - Gain the confidence and mindset needed to overcome fear and turn your entrepreneurial dreams into reality.
- Scale your rental business for long-term success - Discover proven strategies to expand and grow your rental business, increasing your profits and opportunities.
- Stay ahead of the competition by adapting to market trends - Learn how to navigate changing market conditions and ensure your business stays relevant and profitable.
The key moments in this episode are:
00:00:05 - Introduction
00:01:52 - Kyle's Background and Entry into Real Estate
00:06:24 - The Benefits of Short Term Rental Arbitrage
00:11:48 - The Importance of Getting Started
00:12:16 - Using Fear as Motivation
00:13:31 - Scaling and Growing the Business
00:15:18 - Navigating Challenges in the Short-Term Rental Industry
00:23:37 - Funny Stories from Short Term Rentals
00:25:03 - Encouragement for Aspiring Entrepreneurs
00:25:21 - Reach Out to Kyle for Advice
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Minnesota Real Estate
Read the full transcript here:
Mike Swenson
Welcome to the REL Freedom Show, where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson.
Kyle Stanley
Let's get some REL Freedom together.
Mike Swenson
Hello, everybody. Welcome to another episode of Real Freedom. Talking about building time and financial freedom through opportunities in real estate. And I'm so excited to share different stories of different people doing different things. And sometimes it comes out of a challenge they've experienced, maybe a roadblock, but real estate truly is a great path for people to find that freedom. So today we're going to talk a lot about short term rentals, short term rental, arbitrage and co hosting. And we've got Kyle Stanley here. Kyle is the founder of The Fearless Investor. Also The Fearless Investor Podcast using Airbnb Short Term Rental and Arbitrage model in the Fresno, California area. You've got about 50 properties, give or take, depending on the time of day. You also help people and coach people through your six figure formula to do that. And I should mention on this podcast that I have become a student of yours since we had lined this up and have listened to a lot of your podcasts. And I just love your approach. You're very relatable. You really want to truly help people. And so I know people listening to this episode are going to be excited. So welcome, Kyle, to the show.
Kyle Stanley
Cool. That's one of the most detailed and awesome intros I've ever got. I feel like I don't even have to say anything except for thank you. Thanks, Mike.
Mike Swenson
If you've ever taken the disc profile before, my S and C are like 90s, so I'm a details guy. And so it's like this entrepreneurial admin type mentality.
Kyle Stanley
I'm a high D and then a C. So I know what you're saying.
Mike Swenson
Well, yeah, why don't you just share a little bit about your background, how you got into real estate, why you got into real estate, and we'll go from there.
Kyle Stanley
Honestly, real estate is something I wish I would have known about when I was teenager, early 20s because I didn't hear the word passive income until I was 26 years old, which I just think is a major failure of our education system. But I was a sports anchor right out of college, which I thought I was going to be the next ESPN Chicago Cubs, play by play broadcaster. Like, that was the dream. That was the goal. And then I found out very quickly, I don't like working for other people. I don't like being told what to do, what's good, what's not good. I like creative. You know, we call that an entrepreneur, basically. So I started a business on the side and that started to build up. I started to make more money doing this side business than I was as a sports anchor. And I was just like, you know what? I'm done. I want to create my own path. Well, the problem with that, Mike, is that I didn't have a mentor. I didn't know the importance of having a mentor, having help. I just figured you start a business, if you have a good idea, it's going to take off. And that was incredibly wrong. But I just grinded for about five or six years in that business to the point where I was like, all right, if nothing changes, then nothing changes. Because right now I'm working 70 hours a week. And I'm justifying it because I'm saying I'd rather work 70 hours a week for myself than 40 hours a week for someone else. But the whole reason I got into being a business owner was because I wanted not just financial freedom, but I wanted time freedom. And I wasn't getting it. And so my dad ended up going on his deathbed in 2019. And during that time was when I was kind of I'm a man of faith. And I really felt like God was challenging me to just pause, just reflect. You've been go go for most of your life, and you haven't had a chance to just sit down and sharpen that axe. And during that time, I was like, what's? Truly passive. There's no way that everyone who's making money is just like having to grind until the day that they die. And that's when I started looking up honestly, just Googling podcasts like yours and looking up, like, passive income. And a lot of stuff was leading to real estate. And I decided, you know what, I need to figure out which route I'm going to take. Because I heard about apartments. I heard about being a realtor. I heard about flipping houses and all this stuff. And I was like, I just need to pick one. It was about four months of research. I need to pick one. So I decided to jump into flipping. Flipped my first house about six well, important piece this time I was going to do it right. I purchased an education platform. I dropped a large sum of money in the five figures, and I said, I'm going to do this right. I'm going to have help. And it worked because A, I was bought in, right? And B, I had the help that I needed to make all the right decisions, or at least to make more right decisions. I flipped my first house about six weeks after buying in, and then my second house that I got under contract to flip during the renovations, I was like, you know what? Maybe I should keep it as a rental. And then I was like, Wait, what about short term rentals on the side? For the last five years, I've been doing airbnb as a room out of my house. But I was wondering, like, well, what would it look like if I actually did an entire house? I ran the numbers. I was like, okay, if these numbers are right, I'm going to three X what I'm making as a short term rental instead of a long term rental. All these people in Fresno are like airbnb in Fresno. No, it's not a vacation area. This isn't going to work. And I just ignored the noise because I had educated myself. And they were just talking based off of feeling. And so I went out and I did exactly that. I three X my income on month one as a short term rental. And that started the journey for me, realizing that short term rentals are the thing. And then from there, I learned how you can do it without owning the property. Like you mentioned arbitrage and co hosting. And here we are today at 50 plus properties. And it's been a game changer for sure.
Mike Swenson
Now talk about for people that haven't heard arbitrage or maybe don't know what arbitrage is. Just quick cover that. So, folks, know I'll give the real.
Kyle Stanley
Brief version here, but if you want an in depth version, the best thing you can do is go to my website. FearlessKyle.com. And right there on the homepage, there's a form that you can fill out to get your first short term rental in the next 30 days. And it teaches you how to do this. It shows numbers. It shows the real in depth stuff of this. But long story short, Arbitrage, I'm going to lease from a landlord and then sublease on Airbnb or VRBO and I get to keep the spread. Only thing I have to do. I have to furnish the house. So I'm going to invest low end $10,000 high end $20,000 I'm going to rent that from the owner. Let's say arbitrary numbers. I rent it for $2,000 and then with some more expenses. Right? Another $500 in utilities. But then I put it on airbnb and I make $5,000. I made the spread 5000 -2500 is $2,500 of net cash flow and I don't even own the property. That's the wonderful thing. That was the light bulb moment for me when I heard about this strategy. Mike I actually called Airbnb and was like, can I really do this? Is this allowed? And they were like, yeah, it doesn't matter if you own the house. Doesn't Matter. You can have as many properties on our profile as possible. And I was like, okay, I'm doing that. Then as I started to do that, I started to notice. A lot of people were like, hey, Kyle's the airbnb guy. Go ask your questions. And some people started to ask me what if I furnish the house? But I'm too busy. I'm a lawyer. I'm a doctor. I'm a real estate investor. I'm a realtor I'm too busy to manage the day to day. Will you manage it for me? Kyle started to run some numbers, started to see what was worth my time. And I was like, okay, this looks like it works. And so we call that co hosting. It's essentially managing other people's properties on short term rentals and they're in charge of all the expenses. I don't have to put any money into those deals. And it's positive cash flow. And we're typically going to charge 25% of the gross income. So take that same example of $5,000. 25% of that is $1,250 on a property they have $0 invested in. And that's my favorite kind of return. That's an infinite return because you have no money invested.
Mike Swenson
Now, for people that want to invest in real estate or they feel like to make money in real estate, I've got to own properties. What do you say to that type of person? I've got my own answer. I'm curious to kind of see how you answer that question of, well, yeah, but Arbitrage, that's not really owning real estate. Why would I do that? Or why would I consider that?
Kyle Stanley
Well, would you assume this person is maybe new to real estate?
Mike Swenson
Sure, maybe they don't have anything. Yeah, so they've just heard, I've got to buy real estate to make money, or I've got to own the land versus here I'm not even owning anything.
Kyle Stanley
So I'm going to tell that person two things. Number one, I'm going to ask, what's the goal? Do you need cash flow to solve a short term problem or do you need to build up your net worth to solve a long term problem? And most say I need cash flow now because I need to leave a job, I need to start thinking about saving for my kids college fund, I need to create that extra income. And for that person, I say when you get into arbitrage or co hosting and you're not owning the property, you're still getting your foot in the door as an expert in the real estate space. And when you get your foot in the door in real estate, you create opportunities that you never thought were possible. I own storage facilities. I own multifamily. I own single families. We're looking at buying a whole 91 single family complex or not complex portfolio right now in Northern California. Why? Because I became an expert in something that other real estate professionals don't have an expertise in. So I was able to position myself as an expert to fill the gaps in something that those professionals didn't have as a tool in their tool belt and that's I e aka providing value to other people. And when you provide value, typically people want to do more deals with you. So I think it's a great way to start in real estate. And I can just move faster. Right. My highest cash flow month money in my actual pocket was right around $50,000. And find me someone that's going out and buying long term rentals or even buying short term rentals and dropping 5100, 100, and 5200 thousand dollars on every single property that's going to build $50,000 of cash flow in less than four years. I just don't think that that's possible unless you have endless amounts of cash already. So it's just moving faster.
Mike Swenson
Well, and I mean, as somebody here who I work with, investors, long term investors, full time, I can tell you if I'm going to buy, let's just say for clean numbers, a duplex, that's $200,000. The way the numbers work, and especially with these high interest rates right now, you're hoping to get $200 a door per month, right? Maybe $300 per door. And down payment is 25%. So that's going to be $50,000. So I'm going to put $50,000 down and try to get $400 or $500 a month. And so the mindset here is you go further upstream here. Why don't you go build the funnel that could fund that down the road? Go build the funnel that can throw off $50,000 to pour into that property, because there's still a ton of value in the appreciation game, the tax benefits. There's so much out there. However, you can get further faster if you go farther up the funnel and take care of that problem first.
Kyle Stanley
I don't even want to make people think that I'm about not owning properties, right? I own a decent amount of property, and that's what's created the foundation of my net worth, right? My net worth doesn't come from the cash flow. My net worth comes from the assets that I have. And so I have assets and I have properties, and I want to buy more properties. Now, again, when you get into the space, you start to learn, hey, I don't have to put 20% down to go buy a property. I can partner with someone. I can raise the money. I could go and buy a deal with creative financing, subject to or seller finance. These are all ways that we bought a property last year, and we only had to spend $5,000 to buy the property. It's not a short term rental, it's a long term rental. But those are the things that I want to go get those properties with the same mindset of the arbitrage. I want to spend as little amount of my own money as possible to build my net worth.
Mike Swenson
It's a lever, right? That's why it's called leverage. You're putting a little bit of effort in here to get a lot of results on the other side. And so it's because you said yes and got in the real estate game that now all these other doors open up. And this is why I talk about the key is you just got to get started, right? Like, you can't get better until you start. And there's a lot of people out there that will sit and analyze and consume content and think and plan and plan about how they're going to think and think about how they're going to plan, and they don't do anything. And so it's just getting in. And then all these other things open up you've learned so much about these other opportunities because you started somewhere.
Kyle Stanley
Yeah. And what you're just talking about is fear. And this is the whole reason I call my podcast the Fearless Investor Podcast. Is there such a thing as being fearless? No, there's no such thing. But when you get fear, when you have fear presented to you, you're either going to crumble and curl up into a ball or you're going to use that as the motivation to push you to get into action. I saw a good post by Gary Vee the other day, and he was talking about, like, if you're serious about something, why are you only posting about it on social media once a week? And the person ended up being like, well, I'm worried about the right lighting. I'm worried about what I'm saying. I'm worried that someone's going to not agree with me. And it's like, well, then all this fear is driving you into not taking any action when that fear should actually be pushing you. The real fear you should be thinking about is, what does life look like if I don't do this? And that's where to me, if I didn't make those decisions to jump into this, I'd probably still be maxing out at $75,000 a year and working 50 to 60 hours a week.
Mike Swenson
Talk about being able to scale this business, because for somebody to think, oh, my gosh, I've never done short term rentals before, I don't understand it. And then how do you even handle 50 properties at a time? That just seems nuts. So talk about how you're able to scale and grow.
Kyle Stanley
In being a business owner for 13 years, I've learned that any business is scalable. It's just whether that a fits the skill set that you have or that you want to develop, and B do you want to scale it? I meet a lot of people who are like, hey, I've got my little casita in the back of my house and I don't want to get more properties, or I've got my one major vacation rental on the beach and that's the only one I want and that's fine. But me, it was right around month three. I just stopped responding to guests because I had someone on my team doing that for me. And I never want to go back to that. So in order for me to never go back to that, I have to make sure that this machine is fed so I can make enough money to pay enough people to take care of the things that either, a I don't want to do, or b I'm not good at. So I think if you're good at it or you enjoy it or it makes you money, do it. If it doesn't make you money, if you're not good at it, if you know that your time is better spent somewhere else, outsource it. So our team literally takes care of everything. I put three to 5 hours a week into this business. And I check in with my team once a week. We have a once a week meeting. They tell me how everything's going and that allows me to now go and spend all my time with underwriting deals, making relationships with people that are going to bring us more deals, talking to prospective clients, signing deals, and that allows me to feed this machine while they go and do the day to day operations.
Mike Swenson
Now, a lot of people out there see just those a couple of attention grabbing headlines about short term rentals over the last couple of months and it's revenues down, short term rentals are oversaturated. So I was an entrepreneurship and a finance major and I always tell people, you can make numbers, tell whatever story you want, talk about what you've experienced in the market yourself, while some of these other attention grabbing headlines out there might feel like doom and gloom on the short term rental industry.
Kyle Stanley
Yeah, those are great questions. So first of all, I'll use an example of one of my students, John and Bethany, their first property that they got as an arbitrage, they netted over $3,000 in month one. And they're in central California in a place that a lot of people were probably like, oh, it's not going to work there. So there's some proof of concept for me. We had 70 properties right before the end of 2022 in Fresno, Clovis, Bass Lake is kind of our area. And then we also had a partnership with another business in Arizona. I started to see some of the writing on the wall with the types of properties that were getting hit and hurt the most in this industry. And I said, you know what, I don't want to be a part of those properties anymore. So we actually left the Arizona business. We've dropped about 15 properties in our California business because we just saw when there's more competition, then the quality becomes a lot more important. That basic three bedroom, two bath with a dead lawn in the backyard and not much curb appeal and looks like the kitchen is from the early 2000s. It doesn't work anymore. You've got to have something unique in our area. We found out that hot tubs and pools were really the big unique plays that we can make sure, to make sure that we're in still the top five, top 10% of our market. So all of our attention here in 2023 has been getting rid of those basic houses that used to make $5,000 a month and now only make $3,000 a month and replacing those with properties that have made 6000 $7,000 per month consistently, no matter what the market has said, because they've always been in the top 10% of availability. When you're in the top 10%, you're not playing the competition game. You're not a part of Saturation because you're the first one that people pick so that's where we're headed as a company. And that's what I'm also teaching as well. And this is the biggest mistake that you're going to make is if you go and try to do this on your own and you don't know how to evaluate properties, you don't know how to look at trends from not just the last year, but the last few months. If you don't know those things, then you could go out there and end up making a mistake where you get that basic three bedroom, two bath house that you think is going to net you $1,000 a month and then turns out it's losing you $1,000 a month. So the long story short is, yes, there's impact, but if you do this the right way, you're going to be able to find properties that are still providing great cash flow with still very low risk.
Mike Swenson
And it's the same in any industry. Like, once you get more competition, you just have to raise the bar. As a real estate agent, we talk about just slap a sign in the yard, slap at the MLS and hope it sells well, that doesn't always work in a more difficult market. And as real estate agents, there's a lot of agents leaving the industry because they're not able to make money, because they thought it was just going to be easy, like, oh, I can just do this on the side and I'll make 50 grand in some side income. Well, it doesn't work that way. And I think the short term rental industry is the same. It just means the bar is getting better. The people that are going to succeed still can succeed, but the average Joe that doesn't really care doesn't spend time learning the craft. Those are the people that are going to fall out. And like you mentioned, some of those properties that were the average properties are going to fall out.
Kyle Stanley
You and I are both sports fans, and one of the things that I like to talk about whenever I talk about a baseball player who's either in a big slump or on a burner where they just can't be stopped, they're never as bad as their slump and they're never as good as the moments where they're thriving. They're always somewhere in the middle. And that's any industry, especially short term rentals. In 2021, everyone was doing short term rentals and they were making crazy good money. And that was that player who was going on a burner and like, oh my gosh, I'm playing out of my mind right now. But we knew that player was going to come back down and they were going to still hit their 250 with ten home runs for the year, even though they were having a great ten game stretch. That's kind of the way I look at it from 2021, all of us who had been in since 2019 were like, this is really good. Why is this doing so well. I feel like it's going to come back down. And so in 2022, 2023, things have come back down and everyone's like, oh, the short term rental craze is over. Well, no, it's actually just back down to kind of what we expected it was before. No one just really was educated back in 2015 to 2019 about this being a really great exit strategy.
Mike Swenson
You had mentioned that building this business has opened up some other doors for you. Talk about where you see this going in the future for you.
Kyle Stanley
That's a great question. I mean, the biggest door that it opened was the podcast, the YouTube channel, teaching other people how to do it. I never saw myself doing that. I created a podcast before I ever was doing short term rentals, and my only goal, Mike, was similar to yours. Not only was it to provide value to an audience so that they can go out and do something, but really selfishly, it was like, I just want to connect with high level real estate people to really get my learning curve, to get I wanted to build relationships faster. I wanted to learn things faster. And I felt like a podcast was the best way to do it. And then as I started doing Airbnb, people started asking me, like, hey, how are you doing that? And I was like, oh, more people want to do Airbnb. I thought I was the weird that's that's given me the opportunity to teach a lot of people. And honestly, that's where more of my satisfaction fulfillment comes right now is just seeing people that are being able to retire their wives or quit their own jobs or spend more time with their family because they built a business. In this, from a personal standpoint of where I want to go from my business, when we look at short term rentals, it's very volatile. One month I'll make $50,000, next month I'll make $10,000. I want to take that same cash flow and make it a little bit more predictable, a little more concrete. That's why we've gotten into storage facilities. That's why we're looking at also just more creative financing, maybe wrapping mortgages, getting into more long term rentals for the future, just things like that that are a little bit more predictable, I would say is kind of where we want to go.
Mike Swenson
Want to have some skin in the.
Mike Swenson
You really want to help people and give back. So talk about your community that you've built to be able to kind of share with others.
Kyle Stanley
I have a few different communities. One's a free community. It's on Facebook. We just had to change the name of the group because Airbnb reached out with some legal mumbo jumbo. So it used to be Airbnb masterminds. It's now. Short term rental or STR masterminds. You'll see a photo of me on the COVID photo that's got like 150,000 people. It's free. The YouTube channel, the podcast, the Fearless Investor, that's all free. Anything on my website, FearlessKyle.com, that's all free. But the membership that you're talking about is something I created about a year ago. And the goal here for me, Mike, is to impact 10,000 hosts. That's our goal as really just a personal goal, because I've seen how many people are talking negatively about this industry and how many bad hosts there are out there. And it's not like they're trying to be bad hosts. They just don't really know what they're doing. They accidentally accept that red flag guest that's going to throw a party, and they didn't know the red flags to look for. So we created a membership to help people build this business. Whether you want to have one property or 100 properties, the six figure formula is going to help you to be able to accomplish that by being a better host and learning how to be able to build this into an actual business, not just a hobby. So that's something that you can learn more [email protected]. Sixff.
Mike Swenson
I'll close with this. You like to ask stories of crazy stories of short term rentals. Do you have a crazy story from sometime in the past that you want to share with people?
Kyle Stanley
I have two. One, we have a WhatsApp group, and our cleaners have fun with it. They'll send videos, they'll send memes, and they have a good time. But one video gets sent and this cleaner says, you're not going to believe what was in this house. She's got this video going, and you can hear this noise in the next room. And all I can think of is, oh, my gosh, this cleaner is in danger. There's someone still in the room. And sure enough, she turns into the room, and a squirrel falls from the top of the window down onto the floor and. She's recording the whole thing. She's like, oh, squirrel. Squirrel. So that was one thing that to this day I watched that video and it still makes me laugh. And then another was a guest had some fun with our cleaning team. They actually did one of those sex blow up doll things and they wrapped it in a garbage bag and put duct tape over the neck and the arms and everything. And so the cleaner showed up and thought there was a dead body in the house and then touched it and realized how light it was, just like, okay, you know what? Give that guest five stars. That's hilarious. Those are my two stories that come to mind.
Mike Swenson
It's so fun to see that as somebody that has kind of seen a different side of investors, to see you kind of really grasp that building, that income stream that's going to fund everything down the road. It's good to see because, yeah, I deal with investors that are just trying to scrape by and get that little bit of cash flow every month and they're putting mountains of money into to be able to do that. So congrats to you on your success and what you've done and found what you're looking for in terms of trying to find that right spot, that right thing to plug into. And so I know there's a lot of listeners out there that are looking for that thing. And so if that's something that Arbitrage or co hosting might be an idea, reach out to Kyle. But thank you so much for coming on the show and sharing your wisdom and best of luck to you in the future.
