Why This Skilled Investor Owns Solely ONE Rental Property

Dave:
Hey everybody, Dave right here. This Thanksgiving week, we’re revisiting a number of of our hottest latest episodes in case you miss them the primary time round immediately. It’s an investor story initially revealed in September, 2024, however I believe the teachings and insights from it are as relevant to immediately as they’ve ever been. The story is with Mike Baum, who turned to actual property investing in Idaho when a well being situation pressured him to retire early from a profession within the tech business. However what’s actually cool and distinctive about Mike’s story is that his total portfolio is only one funding property. This story makes for a terrific instance of the way you don’t want an enormous, huge portfolio to make a huge effect in your life. Take pleasure in my dialog with Mike Baum from final fall, and we’ll be again with new episodes subsequent week.
Hey everybody, it’s Dave. Welcome to the BiggerPockets podcast. Each Monday we like to begin our week off by that includes a member of the BiggerPockets group and listening to about their investing journey. And immediately we’re listening to from an investor named Mike Baum and Enjoyable info. Mike is definitely certainly one of BiggerPockets communities prime discussion board contributors. He has spent over 10,000 hours on biggerpockets.com posting and serving to fellow buyers find out about actual property. So when you’re a frequent customer to our web site, you’ve in all probability seen his title pop up, however Mike has so much to share on prime of simply what he does for the group already. And in immediately’s episode, I’m going to speak to Mike about how an sudden life change for Mike and a severe one began his journey in actual property. We’ll discuss how he chosen his most well-liked technique of short-term leases and in addition why Mike has chosen to maintain his portfolio small and the way not investing will be an energetic and strategic choice. And that is going to be a terrific episode as a result of I believe it gives a very useful and fascinating counter narrative to what we hear mostly in the true property investing business. And I get it, not everybody desires to remain small, not everybody desires to scale, however I believe it’s actually useful for all of us to study from people who find themselves doing one thing a little bit bit totally different. And Mike matches that invoice completely, so let’s deliver ’em on. Mike, welcome to the present. Thanks for 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 helped them combine our expertise and supported our area gross sales employees. Plus I did demonstrations everywhere in the nation on stage and present prep and did reveals and stuff like that. After which I did a ton of movies and how-tos and wrote a ton of technical paperwork. In order that was my gig.

Dave:
Wow.

Mike:
Yeah. And I did that till 2011 once I had an enormous enterprise, was working 70 hours per week. I truly slept within the sofa in our lab, simply go, go, go, go, go to get a product launch accomplished. After which one morning I awakened and I couldn’t see. The subsequent morning I, I might see, however I had one eye pointing up this manner and one eye pointing this manner, 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 brief time period, after which after a couple of yr of, there was no enchancment. There by no means actually is in a neurological degeneration. You may type of arrest it as a lot as you possibly can, however you possibly can’t deliver it again to the place it was. In order that they put me on full-time incapacity, and that’s been 13 years now. So,

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. It’s not that we didn’t have any revenue. Intel has an excellent taking good care of their staff, so there’s 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 fairly drastic revenue discount. My spouse is working, so that’s good. So it’s not like we’re broke, however we definitely went from higher center class to center class. I assume you might say we have been by no means wealthy.

Dave:
I’m certain it was a change financially, however simply emotionally and psychologically, that’s an enormous simply life shift to being somebody who’s working actually onerous to having to handle your output in a extra concerted manner at this level. Is that whenever you found actual property or began fascinated about actual

Mike:
Property? We’ve had a number of rental homes we’ve purchased and offered some stuff over time. Our trip leases situated in Coeur d’Alene, Idaho on Lake Coeur d’Alene. And I’ve at all times needed to have, I grew up there, at all times needed to have a lake home, and a bunch of issues type of lined up for us to have the ability to afford to purchase this home on the lake. And it was a manner for us to switch as a result of not contributing to retirement any longer as a result of I’ve no strategy to, in regular methods, there are specific methods, however for essentially the most half it’s very tough whenever 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 have now three children, and we have now three grandkids now. So we figured, oh, we’ll have this lake home and we will go and I’ll dangle on the market, however I got here to appreciate it’s going to take a seat 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 type of bop on over. And touring with grandkids is definitely not simple for his or her age.
Choose up, pack up and drive eight hours throughout the state to get there. It’s simpler now that they’re older, however again then they have been very younger. And what yr was this? 2017.

Dave:
Okay. So that you, for some time after your analysis, had it obtained 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 offered.

Dave:
Okay.

Mike:
Yeah, so I imply, it’s not that we have been fully inexperienced, however by no means actually checked out short-term leases in 2017. It was type of, that wasn’t to say the wild, wild west of short-term leases, but it surely was a distinct world than it’s immediately. So I imply, I obtained to get to know Luke Carl and Avery Carl on BiggerPockets. We joined, I believe I joined a little bit after they did. And I began hanging out on the BiggerPockets short-term rental discussion board and was studying every part I presumably might about doing this. And we have been a little bit nervous. I imply, whenever you’re first fascinated about doing a short-term rental, you may have 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 full of furnishings. And once we obtained began, the home was fully 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, but it surely’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 achieved 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 prime of the present, Mike is likely one of the most prolific members of the BiggerPockets Discussion board communities, which we drastically admire. You’re at all times in there answering folks’s questions. We obtained 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 resistant to fomo or concern of lacking out, and it’s tremendous fascinating. So stick round. They are saying actual property is passive revenue, however when you’ve spent a Sunday evening buried in spreadsheets, you realize higher. We hear it from buyers on a regular basis, spending hours each month sorting by way of receipts and financial institution transactions, making an attempt to guess when you’re making any cash. And when tax season hits, it’s like making an attempt to unravel a Rubik’s dice blindfolded. That’s the place Baseline is available in. BiggerPockets official banking platform. It tags each lease, fee and expense to the fitting property and schedule E class as you financial institution. So that you get tax prepared monetary stories in actual time, not on the finish of the yr. You may immediately see how every unit is performing, the place you’re creating wealth and shedding cash and make adjustments whereas it nonetheless counts. Head over to base lane.com/biggerpockets to begin defending your income and get a particular $100 bonus whenever you enroll. Thanks once more to our sponsor base lane.
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 find out how to implement our expertise. 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 need to have all of your geese in a row. It’s important to have every part working. It’s important to ensure 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 onerous programs have to have regular upkeep. You should rent the fitting folks to be a helpful individual to return over and care for one thing. So you need to have someone there. It’s important to have a prime notch cleaner, and generally it’s going to take some time. I’ve been by way of 4 cleaners since we began.

Dave:
That’s truly not that unhealthy. I believe I’ve been by way of far more.

Mike:
It isn’t that unhealthy 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 type. There’s one other city about 18 miles farther south known as St. Mary’s that has some, however the cleaner comes all the way in which from Coeur d’Alene. It’s a complete day job for her to drive down there, clear the entire home, prime to backside, do all of the laundry, after which drive again. In order that’s at all times a key, however getting all every part in place and all of the processes in place, as soon as these are working, then administration turns into so much 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 VRBO, I’m 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 occasions 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 wouldn’t have auto e book turned on for anyone. Everyone has to speak to me and I obtained to get a really feel for they’re. We get a whole lot of faux bookings.

Dave:
Actually.

Mike:
Hello, that is Steve. We’re taking a look at staying at your home. Are these dates out there? You may virtually hear it, and it’s apparent the dates can be found. We had one simply come within the different day, November 1st by way of the twenty sixth. I’m like, wow, that’d be a terrific reserving. I’ve solely had two bookings that lengthy ever that have been actual, however I knew straight away as a result of the wording, after which it takes them a couple of week and a half to get again to me once I say Sure, nice. My spouse and I and youngsters are going to be occurring a trip and my enterprise goes to be paying for it. Can I please ship you this faux third occasion out of nation test?

Dave:
Oh gosh,

Mike:
Give me all of your private data so we will make this occur. Yay. And also you’re like, Nope, solely work by way of the device. I solely take funds by way of the device, sorry, after which they disappear.

Dave:
Good for you. I imply, it sounds such as you’ve obtained some actually good programs in place. I wish to take a step again rapidly although, since you’re kind of in your timeline. You obtain this home for private use, you discovered BiggerPockets, and I believe one of many frequent challenges that a whole lot of our viewers hears is how lengthy do you analysis and study 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 a whole lot of time educating your self previous to, such as you mentioned, handing over the keys to this very useful 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 achieved something like this earlier than. It’s a gigantic expense for most individuals, and it’s an actual threat and roll of the cube. So either side of that, what you simply acknowledged, as a result of I’m not threat averse, however I plan, plan, plan. Should you fail to plan, plan to fail, you take a look at every part, you learn every part. And I used to be better off being disabled. I principally had time so I might study every part there was to study. And being extra technical minded, it principally permits me to get a greater understanding of the way in which finance is meant to work and the way insurance coverage goes to play out. I’ve a few algorithms that I’ve written that hunt the online which are for knowledge. 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 everyone else. That’s why BiggerPockets is, 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 useful as a result of there’s so many people on there which have achieved this and been doing it. And when you have a query, I can reply that query or John Underwood might reply that query or a dozen different folks can reply that query.

Dave:
Effectively, to start with, Mike, if you wish to be a sch for BiggerPockets, you’re in the fitting place. That is the one podcast you’re in all probability allowed to indicate BiggerPockets
As a lot as you need. We actually admire it. However simply so everybody is aware of, what Mike is speaking about is a very free useful resource to everybody. The boards are free. If you wish to study one thing about actual property, go ask a query. I believe there are lots of people who hearken to this podcast who don’t even know we have now these boards. Go test it out, ask a query, go see what different questions persons are asking. I promise you’re going to study one thing. And I believe you’re proper, Mike, I needed to simply get again to this concept of discovering the fitting stability between preparation and concern. Everybody’s going to have some concern. That’s only a regular a part of it, however you need to discover the fitting degree and the fitting strategy to lower it off and say, educating myself will not be going to assist me anymore as soon as I’ve spent dozens or tons of of hours, no matter it’s, studying and studying, listening to the podcast at a sure level, you simply kind of have to leap in. And it sounds such as you did that and have been you profitable straight away or did it take some time for your online business 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 a little bit hesitant. We’re getting the home arrange, we’re filling the home with all types of recent stuff and I wish to be sure that it really works. I went by way of two several types 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 sine weave sheets that the primary individual with heels that have been type of wanted some work on as a result of they put on sandals on a regular basis, pour the heck out of the sheets.

Dave:
Oh gosh.

Mike:
They have been peeled up. You wouldn’t imagine. 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 aspect. My space has obtained low saturation on Lake Coeur. There will not be a whole lot of locations for lease on the lake. I’ve dozens of individuals in competitors, not hundreds. So I worth every part accordingly. However even then you possibly can have a tough yr. So that you simply actually by no means 100% all of the evaluation and all of your ideas and air DNA and the enemy methodology and going by way of and evaluating every part, making an attempt to set your costs and determining your occupancy and ensuring you may have the fitting facilities and the fitting stuff in the home isn’t a assure that you just’re simply going to knock it out of the park. So you need to go into it with a understanding that’s 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 it collectively fairly rapidly, I imply comparatively rapidly 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 enthusiastic about 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’ve got one short-term rental and also you’re pleased with that. Inform me why you’ve made that call.

Mike:
So we have now tried to purchase a number of different locations. Sadly, because the farther down the street after COVID is once we began actually beginning to look nicely, the rates of interest went nuts, and that was loopy. And property values went up and property values in an space the place we have been selecting to do our investing in Idaho, shot by way of the roof. I imply, it was one of many highest within the nation.

Dave:
Oh yeah. I imply, ceaselessly in listening, when you’re not conscious, locations like Quarter d’Alene Boise simply had among the quickest appreciation in the entire nation, was type of going loopy throughout that point. However Idaho may’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:
No, no, that’s okay. Yeah, completely. Our homes, our lake home is value 4 occasions what we paid for it now.

Dave:
Oh my God. In seven years.

Mike:
Yeah.

Dave:
So yeah, why purchase poor when 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 of it. We favored all of it, however sadly the locations that we favored the perfect ended up both promoting earlier than we even obtained residence, began speaking about it, or they obtained pulled off the market or there was varied totally different causes. We took out a fairly good sized HELOC on our main, so we have now money for down fee and to get the home all prepped, and now we’re type of in a holding sample, however we discovered a spot out on the ocean that we have been taking a look at. 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 the pond, Dorey River, which is a serious influx into 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 wish 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 type of late in life on this specific sport. So had we identified extra earlier, I believe we might’ve achieved higher. Should you’re youthful, I believe there’s nonetheless going to be much more alternative shifting ahead. It’s a extra subtle market now than it was seven, eight years in the past. So,

Dave:
All proper. We obtained to take a pause for some adverts, however we’ll be again with this week’s investor story on the opposite aspect. Has it been onerous, Mike, to be affected person a lot has gone on within the final couple of years?

Mike:
Effectively, you realize what? I’m probably not a lot of a FOMO man. Concern of lacking out. It occurs now and again that I get annoyed, however for essentially the most half, I take a look at it like, nicely, you realize 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 truly a whole lot of time on Craigslist taking a look at 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 street, seeing if there’s one thing fascinating, simply type of floating round and I’ll write an handle down and nothing’s popped up. However when you get mad and attempt to bounce on each single deal that comes alongside, it’s going to chew you, for my part. Finally it’s going to chew you. You actually obtained to look at that.

Dave:
And what do you attribute that lack of FOMO to? I imply, I believe it takes confidence, proper? To not be jealous or working, 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 buyers that are available in which are asking questions, they’re of their twenties, twenties and early thirties, husband and spouse or single individual making an attempt to get began. They favored 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 have now to plan for retirement. We are able to’t be, you may have that looming over your head the complete time. Do I sit there and I simply take $200,000 and put it down on black? As a result of generally you’re 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 raffle. You may plan and you may get processed, you are able to do all types of issues, and you might nonetheless lose and no one desires to lose. We noticed a whole lot of that in the previous couple of years. I believe issues have evened out now. So expertise and simply life expertise normally 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 a whole lot 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 a number of younger people coming in. They wish to do short-term leases. Off the bat, they’re single. And my recommendation to each younger investor desirous 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 benefit from VA loans, and he desires to get into short-term leases as soon as he will get out in about three years. And I instructed him, what you need to actually do is benefit from the VA mortgage. Or for many who don’t have entry to VA mortgage, it might be FHA low down 3% down loans. Purchase a duplex, purchase a triplex, purchase a fourplex, proper? 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 need to reside within the place for a yr. Then you definately principally exit the place, lease that final unit, after which do it once more. It’s important 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 another time.
And now you’ve obtained 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 a number of years, perhaps you may have one which’s paid off. You’ve got all these belongings that type this actually, very nice piece of bedrock you could construct the remaining. So when 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 taking a look at another issues.

Dave:
You’re talking my language. I imply, that’s kind of what I did is simply began with long-term leases. And over time I’ve branched out and I began investing in syndications. I do some personal lending. Now you do some totally different stuff, however I really feel snug taking threat as a result of I’ve a strong portfolio of low threat, excessive performing belongings. 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 fantastic thing about actual property is over time you maintain onto this stuff, they carry out. Yep.
Effectively, Mike, I needed to say thanks as a result of I’ve solely been internet hosting this podcast for a number of months, however I’ve been a member of the BiggerPockets group 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 totally free out of the goodness of their coronary heart, that it’s made the group 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 life like business proper now?

Mike:
I believe there’s a whole lot of alternative available, sadly, on the expense of oldsters that have been overzealous of their FOMO purchases of short-term leases. Guess 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 prime 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 fascinating 2025.

Dave:
Yeah, likewise. Effectively, Mike, thanks a lot for sharing your story and your insights with it. We actually admire it. And if you wish to join with Mike, we’ll put his contact data, however simply go try the BiggerPockets boards. You’ll see him everywhere in the BiggerPockets group. Thanks once more, Mike.

Mike:
Thanks. Have day guys.