Women's Money Wisdom

Episode 185:Building a Short-Term Rental Portfolio with Natalie Bruno

• Melissa Joy, CFP ® • Season 4 • Episode 185

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Ready to unravel the reel of real estate investment? Join us as we share a promising discussion with Natalie Bruno, a savvy entrepreneur and enthusiastic real estate investor. Natalie opens up to Melissa Joy, CFP®, CDFA® about her journey into the realm of real estate. We talk about the importance of guest feedback and how Natalie successfully used it to improve her Airbnb. Just as investments require careful calculations and considerations, so does real estate. Natalie takes us through her strategies and plans for building a rich real estate portfolio and discusses the market fluctuations that might affect it. We also shed light on the financial aspects of investing in real estate and provide tips and resources for those who are interested in dipping their toes in this sector. 

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Speaker 1:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and founder of Pearl Planning. I'm Melissa Freidenberg financial advisor.

Speaker 2:

We dive deep into topics like work-life balance, financial planning, personal growth and the intricacies of the sandwich generation.

Speaker 1:

Tune in for money conversations that every woman needs to have. Welcome to the Women's Money Wisdom Podcast. I am Melissa Joy and am thrilled to be joined by a good friend, a really smart woman, Natalie Bruno. She is an entrepreneur and owner at an Ann Arbor-based software company, Jot Full. She's also a real estate investor, currently focused on building a portfolio of vacation rental properties. Her passion for people, relationships and delivering amazing experiences is a through line across her career. Natalie, welcome to the podcast.

Speaker 3:

Thank you, Melissa. I'm so excited to be here. As you know, real estate is a huge passion of mine. I can't wait to talk to you about it.

Speaker 1:

I hear your passion every time you talk about your desires to build and incorporate real estate into your life plan. When it comes to money, that passion just always shows through. Not only do you have the interest, but you've acted upon it. I wanted our listeners to hear your first-person experiences about having a vacation rental through your home. We can also talk about where you plan to go from there and just lessons learned. So many people are interested in real estate as a part of not only where they live, but also as an investment.

Speaker 3:

Yeah, there are so many different ways to go in real estate. There's really as many different possibilities that you can think of. Those are the options in real estate. I had had an entree-inch of real estate investing by accident, because in my first home I loved it and had roommates the whole time just to help offset my mortgage. And then, when I got the opportunity with Jotfull and moved to Ann Arbor, it had been after nine years and I decided I didn't want to sell my house. I just wanted to keep the roommate situation going and turn it into a tenant situation, which I did. That allowed me to move to Ann Arbor but keep the house intact, and so I had the experience of the long-term rental. So I did that for three years, and that was pretty easy to. I mean, it's not always easy in every situation, but for me it was pretty easy, and I liked just having the mortgage and the expenses paid by somebody else and being able to hold on to a piece of property that I loved. And so I like to say that the real estate bug really bit me, because I saw a model that could just really work.

Speaker 3:

Meanwhile, though, I had moved to Ann Arbor, and I don't know if you or any of the listeners know this about Ann Arbor, but it is a prime place to have short-term rentals, and so everywhere I looked there were friends of mine, people I was just meeting, who had these short-term rentals. And of course it's because there's a university here and there is a hospital here and there's just a lot of activity and, of course, the football games that bring in tons of people, and so it was a huge, just endeavor here in Ann Arbor. And so I started talking to a lot of people because I'm like gosh, I really like the real estate thing and I've done this long-term rental situation. I wonder if I could do a short-term rental situation, because it just sounds so fun. I'm a people person and so I really love people and that's one of the things that I tell anyone who's looking to get into the short-term rental space. It's not so much about just having passive income. I wouldn't necessarily describe it as that. If you love hospitality and you love delivering great experiences and you love communicating with people, then it can be a really great side business for you. If you don't love those things but you still like the model, then it just means you have to hire somebody else to do it and run it for you.

Speaker 3:

So anyway, I sold that property in Berkeley my first house and then I did end up buying a house in it's actually not Ann Arbor, but it's in Pittsfield Township, so between Ypsilanti and Ann Arbor and still 15 minutes from the stadium and I looked very strategically for a property that was easily split into two, where I could live, and also that I could manage an Airbnb from it.

Speaker 3:

The reason I wanted to separate the space is mostly because I have cats and I didn't want to have to worry about animals and people and I wanted me and my cats to be able to do our own thing and not bother anyone. I think a lot of people are concerned about having others in their home and disrupting their flow and their world, and so the way that I've set it up here could be a model, I think, for a lot of people, where I am completely separate from the guests. Now, as a people person, I'd love to meet people, so I always let them know, like if you want to meet, or if you want to meet my cats, like I'm always happy to talk to you, but some people do and some people don't, so it allows me to live my own life and do things completely separately, but to have a lot of space upstairs that's utilized by many different guests, which is really fun for me.

Speaker 1:

It's such an interesting story and again, I just hear your passion.

Speaker 1:

A couple of things I want to point out that hopefully our listeners were keen in on is you're a people person, you love hospitality and you're a problem solver. I know that about you from other, just knowing you over the years, and you need to kind of have all those things if you're going to be there and helping to manage your property or the manager, and so I always think through that personality test first, because so many times people have been landlords myself included partially where you can really focus on the frustrations, the negatives, the you know stress when you're turning over a property from one long-term tenant to another or short-term tenant and all the things you need to remember. So it really you're a perfect fit for this type of business and for lack of a better word, side hustle where you really are hustling though. So I think it's important to point out for those interested that you need to do some assessment where your personality really will be Like how will you feel when other people are around your stuff and things like that.

Speaker 3:

And how do you feel when things do invariably go wrong? Because they will. I laugh now, my very first year. This is how I'm in my second year now of running the business and in the first year, every time there was a really weird story or a really crazy guest story. You know, my parents were checking in regularly on me and they're just like how are you doing this? Oh my God, what are you?

Speaker 1:

going to do? Do I remember like there was an ice storm that first year or something where you know you're bootstrapping it all right?

Speaker 3:

Yeah, there were many, many crazy things that happened. Actually, there was one month where it was sort of one thing after another. I live on a hill, I live on a street called Hillside and my house is the very top of the hill, and so there's a long driveway. That's a huge incline, and that means in the winter, you know, you don't catch the snow exactly when it snows, and sometimes it's a little extra. I've actually taken to sledding down my driveway because I've walked down my driveway. But that also means that when guests are there and we might be in the middle of a snowstorm, they also struggle to get up the driveway, which means that one person who had a vehicle and a tractor like a trailer attached to it got stuck at the bottom of my driveway. They were en route to move to Montreal and I had to call AAA the next day and have them, you know, dug out. Meanwhile, that same day I was having a new water heater replaced, and of course they never, never do plumbers come early, but because of the snowstorm they wanted to get ahead of it and they were there early. My guests were supposed to be checked out, but of course they weren't, because they were stuck in the snowstorm, and so the water heater got put in, so the water hot water went off. The guests were still there. Anyway, I decided to refund these folks, because, of course, this is like a terrible experience.

Speaker 3:

The beauty of the, I think, the guest and host relationship, though, is that they saw that it wasn't, you know, it wasn't my issue. It was sort of mother nature, and they paid me back in cash and said no, they can thank you for dealing, helping us deal with this, and they still gave me a five star review, so you can turn any really bad situation into still a manageable and even like I mean, I have a good memory of that, not a bad one, right it just how you, how you deal with the rough stuff that comes, and it will you learn so much in your first six months. One thing that I did that I think is helpful for everyone who does this is not just waiting for the reviews, but I leave a guest book upstairs and ask what, what else can I do? Where do you come from? Why are you here? What was your best memory? Why did you choose hillside matter over other properties, and then what would you do to improve it?

Speaker 3:

And so I get so much feedback from people and in those first six months, basically everything that came in, I just did Like, all right, if they're telling me that I need another iron, I need extra pillows, like all the things that seemed pretty reasonable. Or like if I had people say it a couple of times, I'm like, all right, let's just get the Airbnb where people want it. And then it just starts slowing down because it has everything that people want, and then it becomes easier. So I would say the first six months you learn a ton within about a year and a half. Now it's pretty rare that I have a surprise.

Speaker 1:

So how often are you renting?

Speaker 3:

So I track this in great detail because I'm mostly just very curious about it and I want to see how I can always make it better. So I was curious when I first started how long would it take to ramp up, and when I was doing my financial analysis beforehand about is this a good property to choose, will it bring in enough revenue and the expenses minus the revenue am I going to be where I want to be in hitting my goals? I had to do all that analysis upfront and part of that is determining what the occupancy is going to be and then, of course, what the price per night is going to be. So it takes I think it's going to take six months if you're starting a new property, unless you're in an area that is hugely trafficked like a vacation destination, and or you've had other properties where you can rely on your past reviews to buoy you into getting guests really quickly. But for anyone who's starting the first time, I think a six month ramp up is what should be expected, and so in that time the occupancy was mostly just weekends.

Speaker 3:

The first couple months I opened in football season, so of course they went really quickly, and then by the time December started that first year, so my third month, I started the month with only 6% occupancy.

Speaker 3:

So like two nights, like it was crazy and I was super scared, and so what I did is I dropped my prices, realizing that we were probably in an off season of like December, january, february, and you know I ended that first December at about 36%. So 6% at the beginning of the month, 36 at the end. Now, now that I'm, you know, past that six month period, my general occupancy is anywhere between 60 and 90% Every month. I would say most it's between like 68 and 78%, but I do get outliers that are at 80 or 90 and I do get outliers that are at 60. It's pretty darn booked, not 100% of the time, and it really can't be for me because this is my house and so there are slight occasions where I do want to use my main kitchen upstairs and you know there's a lot of people that go through the house, so it needs to look good off, like really good, and so hotel level Mm.

Speaker 3:

Hmm, I need to have a couple of days where I don't have guests, where I can spot paint and I can really deep clean and I can put in some new caulking around the bathtub that needs it. You know that kind of stuff just needs a few days where I'm able to do that. And you know there are some months that go by where I'm like I need, like I need to not have guests tonight.

Speaker 1:

Well, I mean, I hear two things. I hear success that occupancy rate is very impressive and I also hear a lot of work, like you're doing most of the work when it comes to managing, cleaning, turning over, etc. Is there anything that you're outsourcing?

Speaker 3:

I don't do a lot of the handy work, mm, hmm, so I'll hire painters and I'll hire people to replace things. At first I was watching YouTube videos. I like to be handy and I like to learn stuff, but I don't have the time to do it and I want it done well enough, and so I hire that stuff out. When I travel, I hire cleaners and I would love to outsource the cleaning. I have just raised my cleaning rate for outside for three days that are three days or longer the actual market rate so that I can hire a cleaner all the time.

Speaker 3:

The challenge with the cleaning is, if you're so. The price per night is the huge driver in any short-term rental business, and the market really determines what your price per night should be. So I put my price per night where I want it or where I think my property deserves to be. The market will tell me very quickly whether I can leave my price there or not, and if my goal is to have a certain amount of revenue per month, then I need to adjust very quickly what that price per night is. So there are times in the year where the price per night has to go down, and I have a three-bedroom property where sometimes in the slower months or slower days it's only $120 or $130 a night.

Speaker 3:

Well, if I'm doubling that with a cleaning fee of $125, which is what it costs to clean the property I mean, no one's got a book right, so the price per night has to be high enough or the stay has to be long enough the market rate for cleaning actually makes sense. So it's taken me some time to work my cleaning fee up, and now I am finally where I want it to be, but not yet. On one or two nights days I am hoping in the third year of running this business I will totally outsource that. But I'm here and I have some flexibility with the main job that I do. Then the longer guest stay, the less cleaning there is, which is great as well.

Speaker 1:

It's hard to get those cleaners in just to be on call, like I just got a booking, like I need somebody tomorrow. I know that from my family has a vacation rental that's away from where we live a second home and you would not believe the prices. And especially if you're in a vacation area, then there's very high demand in the population of the labor, availability maybe less so, and there's just not any negotiability of that property. Better look good when somebody checks in. Totally no wiggle room on that one Right, well so, and you are able to take vacations. So there's times when you aren't on site.

Speaker 3:

Yeah, for the last two years I've been taking vacation every quarter. I work at a tech startup and it's the worst scaling and it's really intense. So between a very busy Airbnb and a scaling tech company, life is really, really intense. So you asked the question about what am I outsourcing, and that's something I'm looking at regularly is how can I get more time in my life?

Speaker 3:

But what I do right now to mitigate that is I make sure that I get away quarterly and it's relatively easy to do that, meaning I obviously have to have somebody watch my cats, but that doesn't apply to everyone who doesn't have animals. But I'm on something called Turnover Airbnb, which is a cleaning service where you can have multiple people and if one person isn't available, somebody else might be available, and that kind of system really helps a lot for the travel part, because what you're talking about, where you can't necessarily get somebody right away when you're gone, you have less ability to do it. You know this because you're not at your property, and so having a stable of people that you can get through a software like that is really helpful.

Speaker 1:

So how have the economics, how have the financial, business aspect, impacted your personal balance sheet or your ability to cash flow, your life?

Speaker 3:

Yeah, it's been so helpful. I set out to do this with a goal of bringing in about $1,000 net extra per month. One of the things about being one of the owners at a tech startup and a scaling one is that it takes some time. You're generally doing that the more risk at the beginning and that often means lower salaries than you might be doing elsewhere, and that takes time to ramp up. The sweat equity is real. Exactly what can I do to offset that and to fill out my overall what feels like a salary to me but is now a combo of salary and revenue? And so that goal of $1,000 extra per month, I hit that within the first five months of running it and now it's actually quite a bit more than that.

Speaker 3:

And so the economics, just from a high level, after looking at all my expenses, like, look, I have to live somewhere, so I'm paying for my mortgage and all of my housing expenses, and what I do is I just split it down the middle. The business pays for half of all that and I pay for half of all that. So that's sort of the way that my financial system is working, and so what that means. When I looked at my taxes at the end of the year is, it felt to me, about $25,000 more than I would have had. So that's, minus the nearly $40,000 that it brought in, minus the expenses, brought me to about $25,000 extra of what that felt like for me, and so that was huge for me and I obviously have goals to keep going up. But then you have to look at the tax side of it too and it's like oh, then I have to spend more to make the property even better, right, Not totally hit at the end of the year Constant peaks and valleys, isn't it?

Speaker 1:

I think that is one thing that it's important to explain to people when it comes to real estate is you can't just look at what rent is and say whether it's short term or long term and say, oh poof, I just have that money. Like, there are costs of maintaining a property, there are things that go bump in the night and so you need to be very careful and I know you're extremely analytical and looking at making a decision about your property and making sure it fit with your financial life and what you want to accomplish.

Speaker 3:

Yeah no, and I think that's hugely important. A lot of people want to get into it but just aren't sure. Like, am I going to make money? Is this the right property, all of that, and so one tool that I hope everyone can access and use is something called AirDNA. Airdna just allows you to put your property, any address you want, in and get the estimated price per night, occupancy and total potential revenue, and I would not buy a property without putting my numbers into that, and I based all of my financial modeling on that, and after the first year it is remarkably accurate.

Speaker 1:

Things have changed. What I'm hearing or observing is the market may be a little bit slower right now, although I wonder for you because you are at a really great price point in an area that has so many people moving through it, and then also, interest rates are different now, and I know that you've considered over time expanding your real estate portfolio. Tell me what your long-term plans are and what are some of the considerations that might make the time frames different.

Speaker 3:

Yeah. So when I first started this and saw the possibility with it, I set a goal for myself to have 10 properties by the time I'm 55. And I am 45 now and I bought this first one last year, and so that means I have a couple of years where I don't have to necessarily make a purchase. What I've learned from a lot of my real estate investing friends is there are some years where you make multiple purchases. Once you get a real estate bug, you just want to buy, buy, buy. As you have mentioned, I am a very analytical person and the market has changed quite a bit. When I bought this property, interest rates were super low, really low, and that has changed.

Speaker 3:

I am not urgently trying to find my second property, although I am always looking. My real estate agent, who is also a very good friend, sends me things that she thinks might be right up my alley. I am interested in buying again in Michigan and having a total of three properties here. My next one that I want is something that's not necessarily living in, so something that's farther away. I do have to automate everything. One of the interesting opportunities for a second home is you can buy on a lake and then you don't have to necessarily be 250 miles away. What that allows you to do instead of putting 25% down on your second property, you can put 10% down. There's a little bit more flexibility in the overall not at the beginning. Normally, if you're going to buy your second property and you do that 10% down instead of the 25% down for the second property, I think it's 250 miles. You have to be away from your current property or where you're living. But a way around that or another alternative is that, instead of doing the 250 miles, you can buy on a lake.

Speaker 3:

I was looking at a property in Pinkney last year that needed to be pretty much renovated. The air DNA potential on it was outrageous. However, in addition to looking at air DNA and running the analysis there, I also do my own analysis. I look at properties around the area and see what other people are doing and what are they actually making. I could find no other data that supported that high potential on that particular property. It felt too risky for me to take it on. At the time. Interest rates were crawling up, but they were not where they are now. I could still make it work from a numbers and financial perspective. I have looked at some other properties and have not been able to make the numbers work.

Speaker 3:

I like to be able to clear $1,000 a month. Some real estate investors are different than that. They just say if I can basically cover my expenses for the beginning, I'm fine. If I can get $300 or $400, $500, maybe it's a lot of work for the first month of any new property. I also think it does take some time. The second one, I'm going to have to automate more, which means I'm going to have more expenses.

Speaker 3:

If I'm going to do this, I want to clear $1,000 a month. I have to wait until I find the right opportunity and some of that's my own personal stuff to consider and some of it is the market stuff to consider. My first three I want to be in Michigan and then I have other states selected that I would really like to be in, but Airbnb laws change regularly. It's remarkable how different the laws are around different states. I might not be able to get all the states that I want or all the places that I want. I have a longer list of places than I actually think I'll end up because I know I'm not going to be able to get everything. I do research, I take some of my vacations along the lines of where I might want to have an investment property.

Speaker 1:

In addition to researching where you may want to have properties in the future. It's obvious that you've done a lot of work to educate yourself and inform yourself about the business of real estate. Do you have any favorite resources or suggestions for those listening who are also interested in this space?

Speaker 3:

Yeah, so a couple. I found on Facebook a. It was an ad for a program about women in real estate. It was like 19 bucks and it was three hours of content each night for full week. It was remarkably good. It's basically all women. I think this woman is in Texas. Teresa Todd is her name.

Speaker 3:

She put this together because she, like me, but leaves in the power of real estate investing and how this can change your life and how amazing it is and how many opportunities there are. The content was so good and so rich and I just learned a ton. Now, this model of course, they get a bunch of people in for very little and then they try to sell a bunch of people to buy really big packages, which I didn't do. I got my great content for 19 bucks. That's one.

Speaker 3:

Then the Bigger Pockets podcast is a really good one, with all sorts of different topics within real estate investing and it's really up to date, everything that's changing people. They bring on guests to talk about those different scenarios. Then I also just read a lot of books. I've joined a couple of real estate investing networking groups. People talk about the books. They talk about their different experiences. I look up books, I listen to podcasts, I listen to what books they suggest. I have a list of books if you want me to share them that I thought were really helpful, and then those two resources were really great.

Speaker 1:

Yeah, we'll make sure to put all of that with hyperlinks, into the show notes. Do you mind putting your property so people can take a peek in case they're interested in visiting Ann Arbor? Absolutely, as we're wrapping up, is there anything that you'd like to write as a letter to your former self who is getting into this business? Any thoughts for both your younger, more naive self, as well as for our listeners?

Speaker 3:

Yes, I think that it is really important to find somebody to help you get started. I have not set this up as a business. I am not charging.

Speaker 1:

I may encourage you to.

Speaker 3:

I know there are people out there who do charge. There are packages and there are programs and there are coaches. There is definitely a business for this. I didn't do that. As you mentioned, I have a very entrepreneurial spirit and I just jump in and do things and put a little bit of the cart before the horse. I learned some really hard lessons. Having done that, I help anyone who comes my way to avoid some of the pitfalls that I found at the beginning, one of those being I just put the listing out there. I assumed that Airbnb would look through my listing and make sure I did things right before putting it out there, because I didn't know what I was doing at all. That's not what happens. They don't take that approach. They just put it out there.

Speaker 3:

I didn't have it connected to my calendar. People were trying to book before I was even moved into the house. I had the single room rate for the whole space rate and had a football weekend, the whole family book for $79 a night. I had double bookings. It was a mess. What happened is I ended up having to cancel two, which is like you do not want to do that.

Speaker 1:

It really hurts your stats. I have a cancellation. That really wasn't our fault. It was like the tenant's fault and it keeps us off of the top rating for a long time.

Speaker 3:

Exactly, I didn't know this as a new host. You don't know this stuff how to connect your calendar from Verbo to Airbnb, or how to encourage somebody to cancel if you are in a sticky situation so that you don't have to. There's just so much of that kind of logistical stuff on how to make it work and not like TDM yourself in the foot. If it's the first time you're doing it, you should just talk to somebody who's done it before to help you avoid those pitfalls.

Speaker 1:

Yes, I love that advice. Thank you for sharing with everyone Both your passion, your lessons learned and a little bit about how it works when it comes to real estate. I can't tell you how often this is a topic of discussion and obviously it's clear it's an investment, it's work, it's your time and money, but it's also something that someone can speak extraordinarily passionately about two years in. So, natalie, thank you for sharing a little bit about your life and your business.

Speaker 3:

Yes, thank you so much for having me as a guest on your podcast, melissa. It's such an honor, and I want to talk to somebody else who knows about this business.

Speaker 1:

Yes, but you're the guru, I'm just along for the ride, so great work.

Speaker 3:

Thanks, Melissa MUSIC.

Speaker 2:

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in our conversations, please take a moment to like, follow and subscribe wherever you're tuning in from. It helps us continue to bring these valuable insights every week. Head over to women'smoneywisdomcom. There you'll find tools, tips and a supportive community to help you gain financial confidence.

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Melissa Joy, CFP

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