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We Bought a Business for $1.1M and Nearly Broke

Acquisition Collective · 1:04:15 · Watch on YouTube ↗

BuyerGreg and his business partner
TargetVacation rental property management business near Breckenridge, Colorado
Industryvacation rentals
Year2021
Deal typeSearch fund
Priceapprox. $1.25M
OutcomeRecovered
Lossnot stated

The one thing to remember

A small, local service business can look cheap until debt, key-person risk, accounting complexity, and dozens of tiny operating details consume all the margin.

What happened

Greg and his business partner bought a vacation-rental property management company near Breckenridge, Colorado in 2021 for approx. $1.25 million using SBA debt, a 10% seller note, and about 20% down. They liked the seller, the recurring management revenue, and the constrained mountain market, but the business was smaller and more labor-intensive than expected. Rising interest rates, dependence on one key employee, trust-accounting cleanup, rural operating complexity, and fee/margin mistakes made cash flow very tight. The business survived and grew from roughly 35 to about 60 properties, but the buyers describe the first years as much harder than expected.

Who's telling it: Greg, the buyer and operator of the acquired business The account is from Greg, one of the buyers; the seller, employees, lender, guests, and homeowners are not heard directly.

Timeline

  1. Thesis

    The buyers shifted from a traditional search to a self-funded search because they wanted speed and control rather than outside-investor governance.

  2. Sourcing

    A sell-side broker brought them the vacation-rental property management opportunity near Breckenridge, Colorado.

  3. LOI

    They liked the seller, the location, and the idea of using the company as a platform for more acquisitions.

  4. Due diligence

    They reviewed financials and local short-term-rental regulations, but later believed EBITDA was lower and operations more complex than they had appreciated.

  5. Financing

    They financed the deal with SBA debt, a 10% seller note over three years, and about 20% down.

  6. Closing

    They bought the business in 2021 for approx. $1.25 million and split an approx. $100,000 retention bonus for the key operations employee with the seller.

  7. Integration

    During the announcement week, a second management employee said she was leaving and the key employee was upset because she believed she might have been in line to buy the business.

  8. Operations

    Interest rates rose, margins tightened, operating complexity proved high, and the buyers later spent months fixing trust-accounting problems.

  9. Operations

    They improved cash flow by self-insuring a damage-waiver fee, added systems and services, and grew the portfolio to about 60 properties.

stage where a mistake was made

What went wrong 7 issues

major Too much debt

Debt service got tight

The business looked workable when the SBA loan carried about a 5.5% rate, but the rate later rose to about 10.5%. Combined with raises and the retention bonus, cash flow became very tight, and a self-insured damage-waiver change helped inject about $100,000 of cash.

Mistake made at Financing → showed up at Operations

“It was tight. It got real tight for a while”

Warning signs

  • The deal used SBA debt with only a 10% seller note, and the buyers were already buying a small business with limited margin for error.
  • Interest rates were low at closing in late 2021, leaving the deal exposed if the rate reset upward.

How to prevent it

  • Before signing the loan, the buyers and lender should have stress-tested cash flow at materially higher interest rates, including the seller note, retention bonus, payroll raises, and seasonal low months.
  • At closing, the buyers should have reserved a specific cash buffer sized to cover several months of debt service and operating losses if rates rose or margins fell.
major Overpaid / bad valuation

Earnings were smaller than expected

The buyers thought they were buying a business near the bottom of their EBITDA range, but their recalculation was materially lower. That made every later problem harder because a smaller earnings base had less room for debt, staff, and mistakes.

Mistake made at Due diligence → showed up at Operations

“we recalculated their eBay was more like 360 380 something like that”

Warning signs

  • The buyers intentionally went smaller than their original target range of roughly $500,000 to $1 million of EBITDA.
  • The seller’s advertised EBITDA was around $440,000-$475,000, but the buyers later believed normalized EBITDA was closer to approx. $360,000-$380,000.

How to prevent it

  • During due diligence, the buyers should have completed a full quality-of-earnings review and tied the purchase price to verified EBITDA, not advertised EBITDA.
  • Before closing, the buyers should have reduced price, added a seller earnout, or walked away if the business no longer met their minimum EBITDA threshold.
major Key people left

Heavy key-person dependence

The acquired business depended heavily on one operations manager, and another senior employee announced she was leaving during the sale announcement week. The buyers kept the key employee with transparency, autonomy, and a large retention bonus, but the business remained dependent on her.

Mistake made at Due diligence → showed up at Integration

“she knew that we we had really one key employee”

Warning signs

  • The local management team was very small, with only two management staff plus the owner before the sale.
  • The key employee was upset because she believed she may have been in line to buy the business.

How to prevent it

  • Before closing, the buyer should have privately interviewed the key employee and the second-in-command to confirm intentions, compensation expectations, and any belief they were entitled to buy the business.
  • At closing, the buyer should have used a retention agreement with clear performance milestones, transition duties, and backup training requirements, rather than only paying for tenure.
  • During integration, the buyer should have documented the key employee’s processes and cross-trained at least one backup within the first 90 days.
major Operational problems

Local operations were harder

The buyers knew vacation rentals, but they underestimated the operational burden of this specific mountain market. Rural roads, snow, altitude, utilities, laundry, limited vendors, and guest expectations created more labor and owner involvement than expected.

Mistake made at Due diligence → showed up at Operations

“I think it's just a labor intensive business”

Warning signs

  • The homes were rural, high-altitude, single-family properties on gravel roads, with well, septic, propane, weather, and limited vendor access.
  • A competitor later dropped properties on the buyers’ side of the pass because the number of home touchpoints was too high.

How to prevent it

  • During due diligence, the buyer should have shadowed guest turns, maintenance calls, snow access, laundry, propane, septic, and emergency issues for at least one busy week.
  • Before closing, the buyer should have built a property-level labor model showing expected touches per home, vendor travel time, and local service constraints.
  • In the first 30 days after close, the buyer should have separated homes by complexity and profitability so difficult properties could be repriced or declined quickly.
major Legal / regulatory

Trust accounting was wrong

About a year and a half after buying, the buyers realized their trust accounting was not being done correctly. Cleaning it up required roughly six to eight months of retrospective forensic accounting work.

Mistake made at Integration → showed up at Operations

“we hadn't been doing our trust accounting correctly”

Warning signs

  • The business handled homeowner money, guest payments, fees, and owner distributions, which makes accounting more complex than a simple service business.
  • The buyers were remote and were also changing systems and processes, increasing the risk that accounting mistakes would persist unnoticed.

How to prevent it

  • Before closing, a property-management accountant should have reviewed trust-accounting rules, the target’s chart of accounts, and sample owner statements.
  • Within the first 30 days after close, the buyer should have implemented monthly trust-account reconciliations with owner-by-owner balances reviewed by an outside bookkeeper.
  • Before scaling the portfolio, the buyer should have tested accounting workflows with a small batch of reservations and owner payouts.
minor Operational problems

Small pricing change hurt margins

A staff recommendation to standardize cleaning fees looked reasonable at the property level. Once applied across the portfolio, the buyers realized they had lost a significant cleaning margin and could not quickly reverse it.

Mistake made at Operations → showed up at Operations

“we just lost to 30% margin on all of our cleaning”

Warning signs

  • The business had many small fees and service lines where small changes could scale across all properties.
  • Staff proposed standardizing cleaning fees, but the impact on total margin was not fully understood before implementation.

How to prevent it

  • Before approving any pricing change, management should require a written analysis showing revenue, cost, and margin impact across the whole property portfolio.
  • For fee changes, the operator should test the new pricing on a small subset of homes for one month before rolling it out everywhere.
  • The buyer should track cleaning as its own profit center with margin targets, not just as an operational function.
minor Legal / regulatory

Claims consumed management time

Insurance covered much of the financial exposure, but employee and guest incidents still created recurring legal and administrative work. The buyers had to spend time documenting claims and coordinating with insurers.

Mistake made at Due diligence → showed up at Operations

“we've consistently had at least one um one lawsuit or something going on with an employee”

Warning signs

  • The business used cleaners and maintenance staff doing physical work in guest homes, creating injury risk.
  • The buyer later described workers’ comp, discrimination, and guest injury matters that required documentation and insurance handling.

How to prevent it

  • During diligence, the buyer should review workers’ compensation history, employee classifications, injury logs, and open or threatened claims.
  • Before closing, the buyer should confirm general liability, workers’ compensation, E&O, and homeowner insurance requirements with an insurance broker who understands vacation rentals.
  • In operations, management should keep incident reports, employee injury documentation, and homeowner insurance certificates current for every property.

Prevention checklist 0 done

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Thesis

LOI

Due diligence

Financing

Closing

Integration

Operations

#vacation-rentals#property-management#sba-debt#key-person-risk#small-business#trust-accounting#remote-operations#interest-rates

Transcript 1771 lines · 13369 words · auto-generated captions

She ended up fainting a heart attack.

Like during our negotiations, we paid

out to this third party about

$120,000 that prior year and we had

about 20 to $30,000 worth of claims. So,

you know, we did the same thing. So, we

injected about $100,000 cash into the

business pretty easily.

[Music]

I've done a couple of different software

uh startup companies. So VC backed um

and we sold those off just you know one

of those like kind of I guess

traditional stories where it's just high

stress you know high risk high reward in

that in that environment and just wasn't

sure that I wanted to keep doing that

and and you know keep kind of being in

that space. So, I was um I was doing a

little bit of like taking a little bit

of time doing some consulting, doing

some angel investing and I ran into who

turned in my business partner and he

actually introduced me. I didn't even

know to be honest. I didn't know there

was some such thing as like searching as

like you know like ETA like I didn't

know about any of this stuff. So, he

introduced me over a beer one night into

all that and that was probably

20 2018 I'd say. Um so then you know we

took some more time and um and we

decided you know like hey he has an

investment banking background um you

know I have more of like the operations

uh on like you know startup operations

um background um so let's combine

forces. So then we started we started

looking uh we're like let's let's see if

we can find a a business that that makes

sense to us. So, we had we had some

backers at first and then I think just

going through the process and

negotiating with them, we were like,

"Nope, we're gonna self-fund." Uh, and

um, so as we as we went through our

search process, we kind of whittleled

some of that stuff down. And then we

looked all over at all different types

of industries and businesses. And you

know, really we were refining our search

criteria and wanted something that was

probably similar to what a lot of people

on here are looking for and talking

about, which is like like um somewhat

predictable revenue like so re revenue

visibility at least to kind of

understand what your what your revenue

is going to be. So let me let me put

pause there a little bit and double

click on something you mentioned

earlier. So you you were you started out

as a traditional search and then you

switched to a self-funded search. So

what made you switch from a self-funded

from a traditional search to a

self-funded search? So I mean we were

searching right in the middle like so

pandemic kicked off and that really like

kicked us off to be like full gear cuz

we we thought at the time that the

pandemic was going to cause a decline

which it did at first, right? but it was

going to cause a decline and to make a

lot of buying

opportunities. So, you know, at the time

we're like, "Okay, let's let's really

kick this off full like more full-time."

We were kind of doing it, you know,

casual, but then we got a lot more

serious about it. And we started

bringing opportunities. We started like

evaluating and bringing them and we

would discuss them um, you know, kind of

along the way. And we just kind of

realized that the people who had talked

about backing us, like they weren't, it

wasn't like a a full-on like we didn't

have agreements or anything. We were

just it was all verbal and um you know

it was like we realized it felt like

they were just looking for like a home

run like like you know that's all they

want. they were like like this is like a

guarantee home run like of course like

anybody would do this you know type

thing and you know I think you you can

do that if you're really super patient

right so so so the investors I feel like

there was the same motivation like we

wanted to do it for ourselves and and

they were just kind of waiting cuz they

didn't have to make money they were fine

you know like so they were just waiting

for like that perfect opportunity to

come along so the investors just wanted

the best deal out there

got it Yeah. Got it. Okay. Guaranteed

type stuff, right? Like more more like

private equity, you know, where where

it's, you know, like less less uh less

risk, a little bit more like, hey, this

is like this is a no-brainer. We're just

going to do this and it's going to start

to make money, which is awesome, but we

weren't finding that in the market.

Right. Got it. So, so essentially, which

makes sense from the investor

perspective because, you know, they can

say we're backing a bunch of in a bunch

of searchers and whoever comes up with

the biggest uh fish. All right. Well,

let's uh let's slice it all together.

Let's all of us have some uh some

sushimi, which makes sense. Makes sense.

Um so then we so then we started

talking. We're like, look, we can move

faster. I I had a thing with from the

startup world where you know if you've

ever worked with VCs they can make your

like in a startup environment they can

make things really really challenging.

So we kind of started talking about that

stuff too and what the governance would

be and everything and just decided you

know what like me personally I was a

little bit more like I don't want to

have to deal with reporting to a board.

I don't want to have to deal with, you

know, if we if we decide to make some

investments and and then our like in the

business and our and our margins are

down a little bit, I don't want to have

to like go and justify that um you know,

all the time when we want to make those

decisions. So, it was it became pretty

clear, my business partner and I, we

just like to be able to hop on the phone

and have a like quick discussion and

decide if we were going to do something

or decide if we needed to take a little

bit more time to like talk about, you

know, this. And so, that's how we

started. I mean then it kind of switched

to that when we were searching and we

started searching and then we made what

I what I'm now starting to learn is what

you guys talk about the cardinal mistake

is when we went smaller.

[Laughter]

Yeah. Went too small. So yeah so we were

trying to we were trying to shoot

between like 500 and a and a million in

IBIDA. Um, and we thought we were

getting I think this is very similar to

other stories that I've heard like it

was, you know, somewhere right around

500 like very on the on the low end, but

then once we got into everything with

our with the business, we bought the the

vacation rental um property management

business like once we kind of

recalculated their eBay was more like

360 380 something like that. Okay. So,

so, so, so before you got to the

property management business, what were

some of the industries that you looked

at? Where did you start thinking, okay,

I'm going to buy this type of industry?

And then how did that evolve into the

property management business?

Oh man, we looked at

um I mean everything. We looked at like

a forklift uh rehab company. We looked

at a diesel engine manufacturer. we or

not remanufacturer, remanufacturers. So,

you know, with that one in particular,

like we were excited about it, it's

like, okay, they were basically buying

and selling engines, but we were like,

oh, you can you could dismantle those

engines and part them out and and, you

know, like make a lot more money if you

did that. Um, we we uh I mean, there

there was I don't know. I'd say we were

we were last three um in in the running

for at least 20 different businesses.

Um and and you know, it got down to it

and and my business partner being an

ex-investment banker, he just he had

kind of like his he had a model that he

put together and he was pretty strict on

the criteria. I mean, that's something I

I really gleaned from him and super glad

that I had him along on that part of it

is like look, if if we can't make it

work, like this is our best offer. we

can't make it work. You know, the

brokers would come back to us and be

like, can you do can you come to here?

We're like, no, like this is the most we

can do. Um, you know, some deals, you

know, they would include real estate um

or the, you know, like or they we'd be

up against somebody who was buying the

real estate and we're like, "No, we

don't want to buy it. We want to lease

it." Um, and so we just we kind of had

our our spec in there, but we were

looking at a lot of different businesses

that had pretty consistent cash flow. I

think the the one right before this one

that we that we had um that we thought

we had but just couldn't quite get

across the finish line was a was like a

packaging company up in Minneapolis. Um

so they like custom packaging for all

kinds of different like industries.

Yeah. Um like which was which was

awesome. I thought it was really

interesting. Um I ended up a local local

guy they they decided to go with a local

guy who had a similar business rather

than us cuz we were out of Chicago. Um,

so not far, but but that's kind of what

how we got beat on that one. Um, and

then the the the last like my business

partner was actually all about there was

a furniture design and manufacturing

company. Um, they sourced from Indonesia

and um and shipped here and they they

did projects specifically for like uh

dormitories um like different

dormitories across the US. So for me the

complexity of that business like we were

we actually balancing we had we had

accepted LOIs in both and we we accepted

this one cuz with that one I felt like

the supply chain was going to be really

complex and then the where you're doing

the work is always moving to a different

location. We just wanted a a little more

stability. Got it. Cuz we wanted a

platform business to build build off. So

So how did you find this? So I

had well we had I stumbled on another

vacation rental business on kind of on

accident. Um, and I've been doing

short-term rentals for a long time. Uh,

like we have our own properties, you

know, that we've been doing. And so I

stumbled onto it and it was down in the

Keys. Um, and if anybody's familiar, um,

it's the Keys is kind of its own its own

animal down there. Uh, so we actually

went down, we flew down from Chicago,

went down to Marathon and visited um,

visited the the site and talked to the

owner and and got to know it, put

together some offers. Long story short,

she ended up figning a heart attack.

Um, like during our negotiations and she

just thought the business was worth a

lot more than it was and she was going

to get an allcash offer. Um, we're like,

"No, we're using financing for this."

Um, and so it just, you know, given

given all that stuff, you know, just

kind of the deal just just fell apart.

Um and so then you know short because of

that because we learned a lot about that

went went pretty far in the process with

them that was other vacation rental

businesses had had kind of come up on

our radar and we got involved with some

brokers who specialized in the in the

industry. And so this one that we ended

up buying was uh brought to us by a

broker um that he was the sell side and

then he represented us from the buy side

um and um and made it really simple. was

kind of it wasn't quite like like full

public sale. It was it was kind of like

a limited release to some other vacation

rental, you know, people that he knew.

Um and so I think, you know, a little

bit we got lucky with it. We really like

the we we really like the location. It's

just outside of of Wreck and Ridge in

Colorado. So, I think, you know, the the

location, the um you know, the the size

of the business, we we thought we'd be

able to, you know, grab another business

or two. Um you know, do some um

inorganic growth on it pretty quick. Uh

and the seller, like what we realized is

the seller makes all the difference cuz

we'd just been we had we had another

one. I can't even remember what that one

Oh, it was it was um fasteners. um uh

like like screws and bolts and stuff and

they were a distributor like a distri

dist distribution company um on the east

coast and they we were like all the way

through LOI and I think the the week

that we submitted our LOI for that one

the owner died. Oh wow. And and then

there was a there was kind of like a I

won't call it a struggle, but there was

a little bit of it was it was a lot of

confusion and delays like who has the

rights to sell the business and who's

making the decisions. And it just kind

of the broker wasn't very like wasn't

very good. We were a little bit, you

know, like because of everything that

happened, you know, so it was just a

little bit like what are we buying now?

Um, so you know, we we ended up backing

out of that one. Is we we had realized I

think by that point that the the seller

is is probably the most important

factor. Like we were thinking about

brokers and all this other, but we

realized that the the seller is probably

the most important thing to getting a

deal done. And as long as the business

looked good, um, you know, like it

didn't really matter so much what the

business was. It was like if the seller

was good and and the the valuation

seemed um fair, then, you know, that was

kind of like our trigger. Um and that's

why we went with this one. Um it the

seller was great, very helpful. Um still

stay in touch with them. Um and why did

they want to sell?

She was retiring. So that's the other

reason why why we like this business.

She had started the business locally in

Breck or near Bre and then moved to

Arizona and she was a little bit older

and wanted to retire and so she was

running it and had an ops team that was

local. Um and then that was our plan was

to run it you know same thing um like

remotely. How old was the business?

She started in like 07. Um so at the

time we bought it in 2021 so it was like

14 years old. 14 years. Um yeah. So it

was it was a pretty good business. We

got to look at the financials and see

how it went through the I mean it wasn't

fully through the it might have been

even before 2007 but like you know we

looked at the financials and everything

back through the the

the great uh recession and everything

and you know it seems like a lot of

stuff out in that area especially when

it comes to vacation rentals are a

little more recession proof like people

kind of fly in from all over the I mean,

obviously, you're going to take a hit,

but um it wasn't it wasn't that that

much. So, we weren't we weren't that

also helped kind of calm us, you know,

from like a risk perspective. Um that,

you know, and it is it has it has shown

to be that way. So, even though I think

I mentioned at the beginning of the

call, even though we did buy in 2021,

which is you could argue is somewhat the

height, um I think it was kind of in the

middle of of everything um in the

vacation rental business. Um you know,

really haven't seen, you know, like from

a demand um from a demand perspective

and from like a you know, like is this

is this market going to going to

continue to be stable like definitely um

into the future? I mean, that's just

that's Yeah. So there is definitely a

shortage. The the supply of short-term

rentals is not very uh large and it's

not like a a market where you can build

very easily. So so that area is pretty

you know the demand is pretty strong and

uh so so how what how much was the

business uh listed for or you know um

offered at and how much was the revenue

and then the earnings? I don't think

that they actually listed it, but um

they just asked for offers. Um so we I

think the I can't remember the exact

number for revenue. It was somewhere

around um two two and a half million uh

in total revenue. Um we did it off of

IBIDA multiples. So we did three and a

half times off IBIDA. Okay. What we

ended up buying for you

know 500k. Go ahead. Sorry. No, no, go

ahead. Go ahead. Sorry. You thought it

was 500K?

Uh, yeah. Yeah. So, we we thought it was

about 44 475 was what they were kind of

advertising it at. And then, you know,

as we went through all the financials,

we're like, no, that like that no, that

doesn't count and then, you know, stuff

like that. So, we ended up whittling it

down, but she was she was really uh she

was really open to it. She wanted uh

somebody who wasn't she didn't really

want to sell to a strategic. Um, so

again, you know, buyer preferences

helped us out. Um, so I think that's

really important to just read read the

buyer or I'm sorry, the seller seller.

Um, and and she she had from what

everybody told us at the time, she had

competing offers that were higher than

than ours, but they were what she felt

they were coming from like a strategic

in the area that was going to just, you

know, basically clean house. um you know

like cut out all all the stuff and like

take and she she felt more of a

connection to all the owners like the

all the property owners and stuff. So

she wanted um you know like some people

who were going to treat it more like

like a quote unquote familyowned

business. That's a great point. Yeah,

that's a great point. A lot of sellers

do not like to sell to competitors, do

not like to sell to strategics. They or

or even larger operation. They want to

sell to someone who's going to treat the

business the way they treated it, treat

the clients the way they treated them

and the employees the same way. So it

makes a lot you have an advantage in

that case. Yeah. So so we tried to play

that up and and our and we started as we

were looking at businesses we started we

realized that through the process. So we

started kind of pushing that up uh as

part of our like marketing to to sellers

like marketing ourselves. And then when

we like when we were negotiating the

deal again, you know, looking back, I

think the seller was really great. She

knew that we we had really one key

employee um at the business. Um that was

kind of like she had that she kind of

had the title of operations manager. Um

hey, look, I got bloom. Um what she what

we didn't realize at the time was that

um the this ops manager so she was she

was key at the time very very key. So

the seller said, "Hey, I want to make it

I want to make sure she stays around. I

want to take care of her. She did a lot

of work for me." So we actually

negotiated and split um a retention

bonus with the seller. So the seller

paid half of it. We paid half of it. Um

it was about I think it was about 100k

total for the Yeah. Without one

employee. So what were the terms? Did he

give out the money all at one time or is

it over five years or how did he No, we

did it over We did it over two. We We

should have done something

performance-based, I think. Uh I think

it was a mistake to just make it kind of

a guaranteed bonus. Um Okay. So, as long

as she stays for two years, she gets 100

grand. Got it. Yeah. And she did. So,

Okay. And No, no, no, she stayed. Still,

she's still working there. And you know,

when the retention bonus um kind of ran

out, we we made her aware of it and we

just told her, you know, based on kind

of, you know, a lot of different things,

we weren't we could negotiate a

performance-based bonus after that.

Yeah. Um and to be honest, just kind of

has fallen off the plate and we never

did. So, she's just working on her

salary now. Nice. We also had it was it

was small employee base, so there was I

mean, we have a lot of cleaning staff

and maintenance staff. Um some of which

was W2, some of which was 1099. Um, and

uh, most of the cleaning staff was W2

based on some local laws and and stuff

that they got into with the Department

of Labor. Um, but you know, we really

only had two management staff. There was

this one ops lady and then um and then

one other person who kind of was in the

office and then uh and then the owner.

Um, so when we came in uh we were like,

"Oh, this is going to be And in the the

week that we announced the sale to the

whole staff, um we found out that the

the the second in line of the company

was leaving and moving across the

country. Totally unrelated to us. Oh

wow. Did the seller kn Did the seller

know or No, she didn't know. No, no. It

was it was an announcement before we

announced it to everybody. It was the

same week that she announced that she

was leaving. So we're like, "Okay, that

that kind of sucks." Um and then um the

what we realized then when we announced

it is this key employee who we ended up

bonusing and everything um she we found

out that she was under the impression

whether rightfully or not that she was

in line to buy the business u but it was

never offered to her. So we had a bunch

of kind of that interpersonal stuff to

work through. She's pretty upset you

know like um didn't know us blah blah

blah blah. Um, so we So, how did you

handle that one? That's actually a very

uh common thing and I'm dealing with it

with two different companies. So, how

did you handle it?

Um, I think first, so we sat down in

person with her, which I think was

important to do stuff in person. Um, and

got out of the office like we were in

like neutral territory, you know, and

like took her out to eat a few times

and, you know, just talk to her, let her

know, let her get to know us. And then

also for us, for me, I think it's always

important like on the transparency side

just to be like honest like here's like

here's the transaction like you know I

mean we're happy at this point we're

happy to kind of step back if uh cuz we

weren't like too far into it at that

point. We're like we're happy to step

back but like this is this is I mean it

was like one point it was around like

1.2 1.3 somewhere like that. Um and she

thought she could get the business for

like you know5

$600,000. Um, so there was just really I

think she realized when we started

talking to her about everything that

like she just one she couldn't afford it

on her own and and I think you know

later I think she might have done a

self-evaluation and realized she didn't

have the skills to do all all of those

things with the business like all the

stuff that that we handle that she was

kind of blind to that the old owner was

handling and that we're handling. Um but

I think just you know one letting

letting her get to know us. Um and um

you know building that interpersonal

relationship on that side two I think

explaining here's the deal here's how

the structure happens here is blah blah

blah blah and she realized that she just

couldn't really compete with that. And

then I think three you know offering her

that that really generous retention

bonus. I mean her salary was um was

about 75. she just gotten a raise to to

almost 100. So for us to to give her a

100k bonus was basically a year's

salary. Um and so we thought that was

really generous. Um I mean over the

course of two years, right? So she was

getting like a 50% raise off of that off

of that bonus. So um I think those

things combined together. Um plus the

fact that she knew we were going to be

remote as well and not come in and try

to dictate everything like you know we

were going to give her a lot of autonomy

to continue doing um doing what she

wanted to do. Um, and so I think I think

all those things it took us a little

while. I think she she agreed to it and

then it took us a little while to to

build some trust, but you know, looking

back on it as well, just given, you

know, different industries, different

stuff going on, right? Like we're in a

vacation rental area. So, there's not a

ton of industry or things to do outside

of this, right? So, for her to have the

autonomy and the pay and everything else

that we're able to offer just wasn't

going to happen anywhere else. And she

knew that, too. like and we didn't

really know that going into but like we

realized that like over time we're like

there's no other opportunity around here

that's going to you know compare. So

that makes that makes a lot of sense.

That makes a lot of sense. But she's

still here. We're we're still very good

friends. She does a great job. She runs

it. She's kind of like having we talk

about a lot. It's kind of like having an

an owner another owner without any

equity. That's awesome. So she she

generally tends to work too much. Um

which is you know a good problem to

have. Um, that's a that's awesome.

That's a good team. So, so it's it's

definitely it's definitely worked out.

So, I think whatever we did up front, I

think we handled it decently well. Well,

it's it's great. Like you said, it's

honesty. It's transparency. It's giving

them the option giving her the option

agency essentially to to buy the

business if she wants to. You you told

her, "Here's the price. You know, if you

if you see that you sell buying it,

absolutely would love you to have it."

And then and then the the ability to

give her the chance to see behind the

curtain, you know, what other things,

you know, an owner does in a business

and then all the things that you have to

take responsibility for and be

accountable for that she may not have

seen before. Yeah. And I'm I'm not sure

if something I mean I know I heard them

comment about this later on and it's

something that her and her husband were

also very good friends with her husband

and and you know I've talked about and

that at the time I think you know there

was a lot of talk and there's a lot of

like increased attention on short-term

rentals across the country. I think

alongside this like parallel to to the

industry growing you had a lot of these

efforts to try to curb short-term

rentals through regulation and

everything else. Right. So, at the same

time, we were just seeing the first like

short-term rental ordinances and

regulations go into place in the county,

and I think it had a lot of people

scared and skittish. And so, I think,

you know, besides everything else, I

think that was something else that kind

of played in our favor like, hey, we're

assuming that risk um you know, and I

think she got a little a little timid um

about that as well. So, so how did you

how did you deal with yourself? How did

you deal with that regulatory risk that

may be coming? Because there it was

real. It wasn't uh it wasn't unreal.

This has been this has been ongoing. Um

local governments are something that I'

I've had a lot of experience dealing

with in the past. Like the prior prior

startup that I worked with right before

this one that we started um was in

telearm pharmacy. So pharmacy is a very

highly regulated space and is very

fragmented by state. Um and so that was

a huge part of my job was doing all the

regulatory on stuff on that side. So

basically the short-term rental

regulation stuff I wasn't too worried

about and still am not. Um it's just a

even a lot more localized because you

know you're dealing with with these

small cities and counties, right? Rather

than like the you know the state level

or something like that.

Um, you know, so they had just passed

ordinances and when we reviewed them as

part of our due diligence, we thought

that they were pretty clear and fair.

Um, and and I still think that to this

day, like the ordinances are fine. Um, I

think I think it's I think the challenge

that we have and continue to have is

with uh with the county is county's

interpretation like so the officials

interpretation of of what that means and

what we as short-term rental you know

managers and owners have to like like

what we need to do and what we you know

like to me it's kind of like well that's

not that's not like what we what the

essence of what they trying to do when

they wrote this was. But anyway, we

worked through a lot of that stuff and

we decided that it's it's so confusing

and and I mean there is a path but it's

kind of a maze to get to get through all

this stuff that um that was a value ad

that we could we could have with our

with our with our owners. We're we're

the only right now we would still

consider ourselves the only like white

glove full turnkey property management

company in the area. So, we decided that

that would be a value ad for our

homeowners if we navigated like the the

short-term rental ordinance um arena for

them. Um and I think that's largely been

accurate. I think you know some people

come to us like we've had people come to

us just because they're like I heard you

can help us get our license. Oh, okay.

So essentially you're using you're using

the regulatory burden as a moat to in a

value ad to the clients. Okay, that

makes sense. Yeah, regulation can be an

advantage. Yeah. And so we've kind of

turned it around. So now the the county

has like a you know you can um apply for

your your like your license and

everything online. And so we actually do

all that on behalf of our homeowners. So

we have all the application materials.

We have all of the like you know all of

the the licenses. We we have everything

that we manage. And so it's it's like

for us it's definitely sticky like if

you leave us and all the local property

owners have to have a responsible agent.

I I can't remember the exact language or

something like they have to be be able

to get to the house within like 30 or 60

minutes or something like that. And so

the vast majority of property owners

can't do that. Um so they have to have

somebody anyway. And um so there's just

a lot of a lot of ways and reasons why

that's actually made it a little bit

stickier for us. And by including that

service, I think we're the only ones

like when you look at some of the other

big vacation rental companies um Vicasa

and um

u you know some of the some of these

other large ones that you hear I can't

remember why I can't think of the other

one that's that's really it's really

big. Um but anyway, they don't they

don't do any of that. Uh they won't they

ask their owners for their license, but

they don't actually submit and help them

with it. So I think that's just

something that So that makes sense.

So now going back. So so the deal was

three and a half times about 300k

something. So you bought it for what

like a million a million2 a million one

like 1 1.25 I think was like somewhere

around there was the final like 1.25 and

then what was the structure? Was it all

cash to her or you gave her some seller

financing or what was the structure?

She had a 10% seller note over three

years. Um and uh let's see. And then the

rest was SBA. We did we did I think 20%

down. We didn't have to but but just to

make the numbers work. Okay. Um and

everything everything looked really

good. Um I'll tell you everything looked

really good when we closed. We had a

five five and a half% interest rate and

then that was

later in 2021. And by middle of 2022, I

think it was 10 and a half%. Oh man. So

that that threeyear that seller

financing three year was that uh paid

every quarter or was it standby uh

it was uh it was it was paid every year.

Um, and so we didn't technically have to

like u, so there wasn't any standby, but

we didn't have to make like monthly

payments on it, but we just opened a

separate account like an escro account

and just put a monthly like you know

like carved off monthly in there so that

we had what we needed to every year to

pay it off. Do you remember what would

your what was your debt service ratio

when you closed

at five?

So at 10, when the rate went up at 10,

did the was your were you still cash

flowing okay or you were like breaking

even? It was tight. It got real tight

for a while cuz of course we we burdened

um so a couple people got raises, you

know, just to keep them around. Um and

then with the retention bonus, uh

everything it got really tight. So

really our our kind of the kicker that

I'll say looking back like really I

think really saved us. Um, I don't know

if we talked about this already to Jay,

but we we decided to um to self-insure

with a like a damage waiver on each

rental. So, we looked at it after, you

know, the first few months of owning the

business and they had a company um that

they charged us somewhere around like 60

bucks per um per rental, but we realized

like the just the administrative cost of

having to submit and provide all this

documentation and everything else. It

was just a it was just a huge pain. um

my business partner had a um had some

background in insurance and everything

else. We started talking around and and

we decided to to flip over to a

self-insured where we we collect it. So

we raised it a bit. I think we collect

between 75 and 100 bucks per per rental.

Um and that all goes into uh what we

call kind of like our escro account and

then we try to run about a 20% loss

ratio on that.

So, um you know, quick math was we

before we made the change, we paid we

paid out to this third party about

$120,000 um that prior year. Um and we

had about 20 to $30,000 worth of claims.

Um so, you know, we did the same thing.

So, we so we injected about $100,000

cash into the business um you know,

pretty easily. And so that was that was

a big one for us to just cover all the

cash needs as as you know like through

kind of the debt service through you

know some some growth that we did. Um I

think we kind of lucked out with that

was that was like a big big one for us.

Well that's huge. And what what kind of

insurance is this?

So it's just for incidental damages. So,

we have a policy. It covers up to like

well, it's not technically a policy

because we can't call it insurance,

right? But like um it's it's like up to

$3,000 of incidental damages that a that

a guest causes at a property. So, it's

almost like a tenant tenant insurance.

Okay. Got it. Guest insurance. So,

somebody breaks probably one of the most

common is they break the glass coffee

maker, right? And we have to get a new

carff, you know? So, people break chairs

a lot like they'll sit down on a chair

and break it and we'll replace the

chair. So, you know, stuff like that. I

mean, we've had we've had a couple of of

more major things. I think there's been

over the three years, we've had like I

think two countertops get get like

melted. They were like laminate

countertops if you put hot stuff on and

it just like totally melted it. Um and

we we we just did replacement cost and

the owners ended up um so that's kind of

the deal we have with our owners. Like

we'll pay up to replacement cost. So for

something like that, we replace a whole

kitchen countertop for like 1,500 bucks

with the you know with laminate. Um, and

then they'll usually just get like

they'll they'll just use that as a

credit towards, you know, they'll pay

for like a a stone upgrade, you know, or

same thing with appliances. Like we'll

we'll replace it with a we'll give you

the value of like that fridge or

whatever else and then, you know, you

can choose to replace it with whatever

you want to choose. Interesting. Okay.

So, when you bought the business was

doing two two and a half million and how

many employees?

Well, there was probably 15 total with

like all of our cleaning staff and

everything. Okay. And then how many how

many doors or properties?

We had I think 35 somewhere right around

in that range like when we bought Well,

so these are high-end properties. So

they're like No, no, our margins. So

I'll be honest, like our margins over

the past couple years have gone down

some. Um but I think there was just uh

there was looking at the trends in the

industry there was the years the years

leading up to uh when we bought there

was just higher um higher demand. So

they you know like our I can't remember

our exact numbers that we use. I mean

there's a lot of different ways that

people value um if you talk to brokers

that value these businesses but one is

like how how much are you earning per

per um per unit? And I think we were

somewhere in like the 30 $35,000 range,

like per door. Per door. I can't I can't

remember the exact Okay. exact number,

but in in we we've gone down. I think I

think we average like 25,000 per per

unit now. Um but um you know, we've uh

we're scaled up. We're clo we're about

60 uh properties now. Okay. So

yeah, but we we also had to had to

invest a lot. There was a lot of stuff

that we didn't realize because we

weren't familiar with we were familiar

with vacation rentals which is what got

got us interested right but like like

most people we just didn't know we

didn't know um and we realized like

laundry like they were doing like you

have to imagine they were doing all of

their laundry inhouse like so they had

just

residential washers and dryers in their

office and they were just like they had

we had a staff member there was just

like you know processing laundry every

day. So we've actually totally changed

that. We have a linen rental service.

Um, and and surprisingly enough, from

where we are, we couldn't we couldn't

get it. We worked on that for a long

time. We couldn't get it. But so now we

actually ship um ship all of our stuff.

We have it delivered from Colorado

Springs, so it's about an hour and 45

minutes. Wow. Um, um, but that eased our

like that side of stuff a lot. Um but

every time you know we were we we bought

the business we're building it as a

platform. So every time we found some

savings we usually deployed that in you

know something else that we wanted to.

So what else what else what are some of

the other things that you didn't know um

you didn't know that you didn't know?

Um I think

um I think some of the unique things

about uh about up there in the

mountains. So to give you guys a little

context, our county where where all of

our stuff is, so we're about 20 25

minutes from Breen Ridge, so it's really

close. A lot of people like that's

probably the biggest draw in the winter

months. Um but it's all it's all gravel

county roads. Um it's uh they're all

single family homes, so generally

they're on larger like larger acreages.

Um like we have one we have one that has

like 70 acres, but a lot of them have at

a minimum of an acre, but usually at

least a couple of acres around them. So

you know, you're not right on top of on

top of each other. Um and you know,

because of that and the county in

general is um is pretty uh conservative.

So they don't like to they they don't

like government and they don't really

like a lot of the development. They they

have all these local sayings like don't

breenidge my fair play which is like the

local town. Yeah. Um so so I think what

we learned is some of those dynamics. Um

you know and and just how things work

like we we fight with our owners and we

try to educate our our homeowners and

even our guests sometimes on on some of

the stuff. you know, we can't just we

don't have like five different vendors

that we can call and get somebody to the

house right away to help us with like

electric or something or, you know,

people complain about that the cost of

of getting somebody there to do stuff

and it's like, well, you know, that's

just kind of the way it is. Um even you

know like there's power outages you know

like in the area or you know plowing

when it snows like like the county like

gets out and does it when they want to

you know it's not it's not the same

service level that you get a lot of like

more developed areas. So it's a little

bit it's a little bit I mean it's it's

more fun. I like it. It's it's it's a

lot quieter. It's a lot a lot more space

um a lot more privacy um than you than

you get like if you're like in Breen

Ridge or somewhere close in Summit

County. Um so you get a lot but you know

like you you give up a lot um for it and

so you know cell phone coverage I think

has like has proven to be a ch ob

obviously it's getting better especially

with Starlink now we have internet um

almost everywhere but that was a

challenge. um you know, light bulbs

burning out. Like I've never seen so

many light bulbs burn out in my entire

life. It's just but I think there's

electrical storms up there and it just

happens, right? And um I think um

altitude is another big one. Like so our

office is above like our office about

10,500 ft and um and all of our homes

are above 10,000. We have some up almost

at 12,000 ft. And for those of you just

put it in context, 12,000 just over

12,000 feet is the tree line. So they

don't really build above the tree line.

Um but we have places that are really

high. So when you have people flying in

from Florida or Texas, which is where a

lot of our um guests come from, they a

lot of them have altitude sickness,

especially if they don't especially if

they don't prepare or if they go out

there and drink alcohol and get in the

hot tub and you know, all this other

stuff get super dehydrated. So you know,

dealing with I think a lot of that

stuff. Um and guest expectations, you

know, on that side of things. I mean,

like gravel gravel roads means they're

not going to be like clean asphalt when

you're driving, right? It's it's going

to be snow like they they take the bulk

of the snow off, but there's still going

to be snow and ice on the road. Um, so I

think all those things are just um

unexpected, but I mean, from the that's

from the area. I think from the business

is um I I think it's just a labor

intensive business. Um, and actually we

we just got um a few properties. There

was there was another guy, this is a

good example, was another guy who was

managing u a a rental business over in

Breck and he also had some properties uh

on our side like where we are. And when

I say our side, this is there's a pass

between us. Um and he decided to drop

all the houses on our side. Um and so

they he basically referred everybody

over to us as a management company. I

mean, he did he did the math and he said

his touch points like the number of

times he has to go like touch a home uh

were much much higher on our side. Um

just given you know we're we're all on

well and septic um you know all the

systems are well and septic. The

electricity you know may not be quite

quite as reliable. It's all um propane

like there's no gas lines that are run

to the houses. So like all of these

little things um and every house being

independent um all add up to like a just

a just a more difficult equation. So um

I

think I think I probably would have like

you know looking back I probably would

have pushed um one to understand the

finances a little bit better when we

when we got going. I think being a

smaller business what we realized is

very small changes scale up very

quickly. Yeah. Um, and we didn't realize

like, oh, if we just make this small

adjustment and our staff is making this

this recommendation that all of a sudden

like, oh well, like our staff came to us

one day, we're like, well, we want to we

want to standardize our cleaning fees

across the portfolio cuz some were

paying a lot and some were not paying

very much. And we're like, okay. And so,

they went and did all the math and they

came back to us with recommendation.

We're like, great. And then we realized

that we just lost to 30% margin on all

of our cleaning, you know, like. So, um

I mean I think just you know little

things like that along the way and then

and then it takes a long time to recover

from that, right? Because you can't

because you can't just make those

adjustments back quick. Stone, you had a

question. Yeah. Yeah. I had a bunch and

and thanks so much. I know I was walking

into the office. Um so really appreciate

this whole story and sort of all the

sharing um that you've done. This is all

truly like very relevant to what I'm

hoping to do, which is buy, you know,

sort of an Airbnb short-term rental,

medium-term rental business probably in

South Florida, and then basically use

that opco to then go aggregate a

portfolio of um of properties that are

going to generate a higher yield by

virtue of sort of renting them, you

know, medium short term. And so, but I

have all this um guttage about sort of

what uh like how difficult that business

is. And it sounds to me a little bit

like is that am I understanding the

numbers right? It's kind of 12%

um eBay margin. Is that right? It's like

two two and a half million bucks of

revenue and then kind of when you buy

we're some somewhere Yeah, we fluctuate

you know depending on the month. Uh we

fluctuate I'd say between 10 and 14 to

15% ebida margin. Got it. 10 and 14 to

15. And and I guess my qu one one big

question that was I'll tell you if

you're doing sorry if you're doing that

math I'll tell you we average 30% is our

management fee. Yeah. Um and 30 30% of

their rental proceeds. So we keep So if

you look at if you look at the breakdown

of reservation obviously taxes comes out

off the top. Um, and then we have our

cleaning fee. We keep 100% of our

cleaning fees. So, we take that off of

the top. Yeah. Uh, we have a couple

other like fees like everybody else that

go in there that we take off the top and

then we split the 30% uh of the rental

process. So, the rental proceeds what's

left after those other fees come out

like our credit card processing fee, all

that other stuff. Right. And Got it.

So, so when you look at any reservation,

you're probably like the total

reservation amount. Like we're we're

probably down to about 50% of it is

actual rental proceeds. Um, and then we

split that with the with the owner. 50%

of the like if someone's paying $1,000

for three days, it's like 500 of that

rental proceeds and then you're taking

30% of that 500. That's And I And I've

seen stuff like up and I don't know what

if you're looking at the business down

here, but I've seen stuff up in like the

the Outer Banks area, they're doing like

16%. Um on the management fees. So

obviously you have to you have to you

have to weigh that. Like we we charge

more like if we're taking care of a hot

tub at the property because that's a lot

more work. Um but you know so you got to

weigh like how much are you putting into

it and then like so yeah I mean I think

that's a big thing that you have to be

thinking about is what is your what is

your management you know commission and

how competitive do you have to get on on

that because you know it's going to make

a big difference if you can push that up

to 30% or 35% um you know that that

helps you a lot or if you can if you can

load it down with fees and your owners

aren't going to get too mad about that

on the top side that helps you too

because you're keeping 100% of that. Um,

yeah. Interesting. And are you guys

using Airbnb or VBO or one of those? I I

might have missed that piece, but yeah,

all of So, all of them, we're a

traditional like multi- channel listing

company. So, we any property any

individual property you'll get listed

like minimally on um Airbnb, Verbbo, our

own website, so our own direct bookings,

and then Booking.com, and then kind of a

conglomerate of others that, you know,

kind of come along with stuff. But those

are the main ones I'd say. you know, the

three like our own website, Airbnb and

Verbbo, we probably split about, you

know, about a third, a third, a third,

um, in total rentals. Got it. And and

how much time when you were looking at

buying these businesses, you and your

partner, how much time did you sort of

think you were going to end up spending

on the property management piece, like

actually parachuting in and solving

problems versus how much time you're

actually spending? I think this is

always interesting for, you know, this

is a question I always ask when we're

sort of in our our weekly meetup with

Jay and the Yeah. team. So coming from

So I don't know if you heard my back. So

coming from I was managing like we have

a we have a single family property up in

Wisconsin that that I've been managing

with my brother. Like we own and and

manage ourselves. We've done that for 10

plus years. I have a couple in Chicago

that I'm involved with. Um coming from

that perspective to what I would

consider more like quote unquote scale.

Um I've realized there's just a lot more

stuff that happens at at scale. Um it's

just the frequency of stuff happens a

lot more. So um I don't know. At first

we it was a lot like I spent we spent

the first three months when we bought

the business we we were out on site

working every day um just to learn the

business and and kind of get involved.

Since then, I mean, you know, I think it

varies depending on the time of year.

Obviously, you know, we're just coming

out of busy season, um, like spring

break and everything. Um, so really

depends on the time of year, but we've

also been able to like supplement

ourselves with, uh, with like some

overseas, like some Filipino um, virtual

assistant type um, type support. Um, so

it's it's started to limit us, but I'd

say it definitely at first it was a lot

more than I thought. And then I think

like anybody going new to business, you

know, it's like, well, I could just let

all this stuff go. Um, and I'm sure it

would probably operate just fine. Um,

but you know, let's let's kind of like I

wanted to get I personally wanted to get

involved with each one like each each

different and kind of almost take it

over so I could understand it. So then

we could like standardize it like

everybody else, right? you want to

standardize it and then once we

standardize we either hand it off to a

to like a virtual assistant if it could

be done virtually or if it needed to be

done in person then we can you know

start to have have kind of standard

processes and expectations for

everybody. So, you know, going through

that process was was pretty long. And

then I think the I think the biggest

time suck for me was probably when we

realized about a year and a half into

the business that um that we hadn't been

doing our trust accounting correctly. Um

and so then I had about a 6 8mon

um kind of forensic accounting

uh you know fun hey we have to clean

everything up retrospectively which is

like not fun. Um but you know once we

got through that um so that's probably

the first two years like once we got

through that stuff we really my partner

and I made it our goal like after two

years we were going to try to step out

of a lot of the day-to-day and just do

like you know as much as we like so we

probably spent anywhere from like 20 I'd

say 20 to 30 hours a week just doing

some of that stuff and then we were we

were planning on on uh on scaling that

back a little bit more and buying

another one but just you know haven't

found like we've been searching some but

just haven't found the right

opportunity. Um, and is that 20 to 30

hours sort of 20 to 30 each of you or is

that like collectively that you're I

think probably 20 to 30 for each of us.

I don't know honestly my my business

partner might do a little bit less um

than me. I I I stay a little more

involved with the operations and so I

get involved with the stuff like a

credit card dispute and it just takes

time to you know like go through and

document like what happened or like a

you know if it's like a major major

guest issue you know like I'll I'll get

involved with that stuff. Um and then he

he deals a lot more with like insurance.

So, if there's, you know, if we have,

which which has happened every once in a

while, like um you know, we had a guy

fall off a fall off a balcony that was

like 14 ft in the air onto like a gravel

driveway and broke his neck and had to

be airlifted to Denver and um you know,

so like when stuff like that happens and

I think he works a lot more um or as

most probably as most small business, it

might just be our our line of business,

but I would say you know, we always have

or you know, I can't say that it's been

three years, right? But we've

consistently had at least one um one

lawsuit or something going on with an

employee. Uh kind of like once you wrap

up with one, there's another one that's

floating out there. Um and so I know I

know we've lost we've lost two of those

that went to like went into the

insurance companies duking it out,

right? Um, and there's been like two

different payouts that haven't affected

us at all, but um, you know, like two

different payouts to those individuals

and but it just, you know, it's a lot of

documentation and a lot of just like,

you know, just time suck type stuff. And

for those ones, you did have insurance

because you said you had the self

insurance piece, which and then that the

insurance that's a different kind, I

guess, right? Like the casualty or or

Yeah. Is it workman's comp? Sorry. Is it

workman's comp? So, we had one that was

uh we had one that was workers comp. Um,

and that was a lady fell and hurt her

hip. There was another one that turned

into this just mess with the with the

state because we had another cleaner

that fell and hurt her rib. Like she was

changing the sheets on a bunk bed and

she hurt her rib and then we tried to

like like be nice and negotiate and so

it technically wasn't workers comp

because she ended up filing workers comp

and everything was fine. But then she

sued us for discrimination and

um like I think discrimination based on

her sex and her disability which we

didn't know she had a disability. So you

know um but you know there's that one

and we had another

one. Um I can't I can't remember the

other one now. But it just uh you know

with the with the injuries that's like

general liability. Um so and the and the

homeowners um like the insurance of the

property covers that primary. Um and

then ours is like a secondary to that.

Um and then we have workers comp. Um,

and then I think ENO type stuff too,

which you know I don't it doesn't really

apply too much, but those are those are

major. But that's one thing I would say

we've been really strict on from a

liability perspective is um insurance

limits um on the policies that each one

of our homeowners carries. And um you

know, even if they don't carry it, we we

have it in the contract that they have

to have that so that like you know,

they're basically in breach of contract

if they don't. Um so that will that'll

protect us. um in the event that

something does happen. But I think

that's really important because we I

mean there are some houses that would be

highly profitable houses for us, but

they want us to basically assume all the

liability at their at their place and

we're just like no, our our margins and

what we're making off of this are not

going to cover, you know, your the risk

that you're you're putting up,

especially when you're getting like the

you know, like the bulk of the money

that comes out of the out of the the

property like you're getting it. So that

makes sense. No, I've got tons of

questions. I know I was sort of joining

late and missing part of it, but but you

had a question. I'm actually down here

in um in South Florida. If you want to

meet up and grab a beer and talk about

Oh, dude, that would be great. Yeah, we

just got back uh from Yeah, I would love

to that. Feel free to follow up and we

can set some Are you Are you based out

of South Florida now? Uh I I winter down

here. I'm a I'm a I'm a weak Chicago

guy, so Okay. Yeah, that's I was I was I

heard you say Chicago earlier. What I

like I wonder how has the remote been

for you? I know you were there you were

there 100% for a while, but like you are

you back there in person once a month,

once a quarter, you know, more often? We

we I mean we do we do it based on when

there's a need.

Um I think that I think it's worked out.

Um I think we really the the one

employee I was telling you about her

name is Angela. The one employee I was

telling you about she because she's kind

of like an owner. I mean, she works like

like I have to tell her to take days

off, right? Like, hey, go take a day

off, right? So, I think because like

having somebody like that, um, she

doesn't always do it the most efficient

way or she may not always do it the way

you want it done, but she gets it all

done, which is, you know, like I think

key having somebody like like that

that's just going to pick up the slack

any time has been that's that's really

the biggest enabler. I mean, outside of

that, um, I mean, with her too, I mean,

I would I would trust her. Like again,

she doesn't always make the decision I

would as an owner, but she she wants to

do things in the best interest of the

business and the best interest of the of

the homeowners. Um, and so I would tr

like I trust her with the bank account.

I trust her with all that stuff, right?

So So I think that that trust level of

of of her in particular and and her work

ethic makes it possible. We tried to for

a while we tried to go out uh we went to

like a once a quarter, but it was kind

of like an ad hoc. We weren't like,

"Okay, here's our schedule." be like,

"Okay, we need to be here like these

months cuz there's a like we're

switching over laundry from doing it

ourselves to having it delivered to us."

You know, it's so like we're going to be

there to help with that. And um you

know, like so those are those are like

important moments. I will say there's

been a lot of frustration from my side

as an owner cuz I'm more of a hands-on

guy that like something's going on, I

just want to hop in a car and go solve

it. And that's been that's been very

frustrating for me when like you know

guest calls at midnight and you know

something's going on and like I know I I

know that if I was there I could solve

this like really really quickly but I

can't um cuz I'm you know somewhere

else. Um so that are you getting those

midnight calls like you're it's not

going to At first I was. Yeah. Um not

anymore. Uh but at first yeah at first I

was and that was that was that was

frustrating for I mean, it wouldn't it

wouldn't have mattered to me. And when

I'm out there, like when when I'm in

person, like on site, I always tell them

like, "Put me on call. Like, I'm happy

to take this, give you guys a break, you

know, and okay, it's 9:00 at night and

somebody's out of propane. Okay, like,

you know, we'll we'll go take care of

that." Right. But um but it that was

kind of a long road to get all that

stuff. Um the kind of the 24/7 coverage

uh figured out and you said you had to

pay how much for you had to pay her how

much to be sort of the person that's in

charge. Angela, I know you mentioned it

before, but um it I mean it depends

there there's companies out there to

help you in the space, but I'd say

somewhere between 80 and 80 and 95 is

probably going great for somebody like

that. Um you know, she I will tell you

that, you know, we we actually

implemented EOS at our business as well,

or we didn't get it fully implemented,

but we went through the majority of it.

And through that process, I think we

realized that there were things that

were like on her plate that she's just

not really capable of doing. So, I think

if we were to like kind of clean the

house, I would say I would probably

lower her salary a little bit and and

and free up some extra cash to give to

somebody else who um you know could

fulfill more like the full duties of

that role. But um you know like that's

that's part of I I guess staff

management in any business, right? You

kind of have to learn those things about

people over time and then figure out

like how do you want to reallocate. Um

Oh, sorry. I know you uh No, no, no,

you're good. No, you're good. Now, I was

just those are great questions. Now, I

was just going to ask like in terms of

like you grew from 30 to 60 units. Did

you do that organically uh running ads

or you inorganically or was it the guy

that just left and opened up the market

for you? Yeah, so we had a couple of

different property management companies

in our area that shut down. It's it's

not easy to make money. Uh the margins

are tighter in our in our area because

of labor costs gone up, you know, like

kind of just everything is a little more

expensive. Um plus our interest rates

and it's just hard. Um but so we had a

couple of people that left um left the

area and then um it was just a lot of

word of mouth. Like I said, I think

we're we like the area and part of

that's part of why we bought it is um

we've kind of cornered the market for in

in the area for somebody who's full

service and um you know it'd be really

hard for somebody else to come in and

compete cuz to get from you know your

your sub 10 properties that you're

managing, you don't get you don't get

any of those like economies of scale,

right? So, like for us, shipping all the

laundry off to a rental service like

saved us, you know, quite a bit of money

and and labor and, you know, everything

else. But, you know, we couldn't really

get there until we got to like 40 to 50

properties. Uh, cuz you got to be

ordering like minimum amounts. Um, so I

think there's I think there's definitely

like in the property at least in our

area like be because services are a

little more limited because of the

distance between stuff. Um, you know,

there's definitely like a you got to get

over this threshold and then you get a

So once we that's why we kind of were

like, "Okay, let's take almost any

property we can get when we first bought

it." And that got us over like we got to

like 45 pretty quickly, 4550. And we got

up to 70 and we've kind of trimmed some

of those off now that just aren't as

profitable. Um, and but no, we didn't we

didn't do any of that like actively. It

was just other people leaving and and

just word of mouth in the area. Um, you

know, people building houses or people

buying houses. we know all the realtors

that are in the area um and they all you

know like they'll recommend us and um so

that's and did in your responsibility

did it grow at the same level or you're

like you know you're kind of we grow we

what we call it we grew we didn't scale

um so um yeah so our our margins went

down I think you we added some staff we

we added a lot of a lot of products to

our portfolio um to help us manage

things at scale. Um like a revenue

management system that was not in place

before before us. We have a whole like

operating system in Breezeway. If you

guys aren't familiar, it's it's awesome.

But you know, then you're paying for

that. And um so there's a lot of these

like services um you know that that we

that we added in um to to take ourselves

out of the day. To answer your question,

like take ourselves out of the

day-to-day um and having to manage a lot

of this stuff. But, you know, having

like the 24-hour on call service, you

know, like having all this stuff, it

just, you know, all those things eat

into your eat into your margins and and

um and so yeah, we we knew we were

growing with the with

the the idea in mind that this is going

to be the platform and we're going to go

buy another one to plug into this. So,

we'll have the infrastructure in place

to to go to go get that. So, our next

step is to to get a to buy another

another one and plug it in. Okay. So,

final question. What was that? What

would the next one be look like? What

would what would it look like?

It's under debate right now. Um knowing

what you know real specialty is like is

our specialty cuz you know talking like

about you know South Florida it's like

well would it make sense for us to come

down here cuz there's no snow. there's

you know like a lot of the challenges

that we've figured out how to overcome

don't really exist here right and I'm

sure there's different challenges to

just you know so is so should we come to

should we look in a place like this as

like a warmer climate or should we stay

focused on hey we really have expertise

in like like winter mountain um you know

environments um you know we've also

talked about size we we looked at one

that was um almost almost 4 million in

IBIDA um and that was I think a 5x on

that one. Nice. Um so it would have been

something where we'd probably I mean we

wouldn't selfund that one. Um we

probably have to go do a raise, but we

just weren't from a from an investor

like raise perspective uh from um from a

like a governance perspective, all that

stuff. We just weren't ready for it and

the deal went went pretty quick. Um but

that was a it was a good company. Um you

know, we've we've looked at a few

others. I think I think we want to go a

little like to what everybody said like

we'd like to go a little bit bigger. Um

we'd like it to solve um solve a little

bit of our labor issue. Like we still do

rely a lot on this one employee, Angela.

And although we have a lot of redundancy

and a lot of documentation now, like

it's just hard like we we can't in our

current size and in that market, there's

no way to put somebody else in there. Um

yeah. So if we if we did move to another

geographic region, maybe we have

somebody who could take over some of

those, you know, roles and

responsibilities as well. So, but my

argument would probably be like a a

mountain uh like probably a mountain

destination um you know, somewhere in

the in the west probably. Um uh so cold

cold weather climate uh with snow. Um,

you know, likely more single family

homes, although I wouldn't be opposed to

doing like a condo building or things

like that that are like seem they seem

to be at least from my perspective, a

lot easier because everything's in one

place. Yeah.

So, yeah, I mean that that's kind of

like our I guess our thesis right now

would be go do that because I think

that's a lot more of our expertise lies

and how do you how do you do that stuff

rather than you know like how do you

take care of a place in Florida is a

little bit different. You guys got

permission. I would say I would say the

only thing that I would add is a higher

nightly rate.

I think like your nightly rate is a like

on a on a mid to lower. So if I could go

double that or even like triple that,

that will make your life much easier.

Yeah. And and we've we've started to do

that too with our like as as we're

looking at stuff like I've started to do

some like our very first bisdev stuff

where we're finding properties in the

area and actively seeking those specific

properties. Um and and and of course I

mean if somebody comes to us honestly

with like a two-bedroom like one bath or

two bedroom two bath we're just like no

thank you. like we just can't, you know,

you can't about it unless it's like

super unique. Like we had this really

cool, it was like a dome treehouse thing

and it's like, okay, we, you know, I

think we can try this one out, right? Uh

cuz you can you can um charge a little

bit more for that. But um yeah,

definitely in the industry, I think

we're on the on the lower end except,

you know, during that's on average

throughout the year. I will say one

thing that is unique about us and you

want to look at when you're looking at

these properties is the cyclicality and

the seasonality of it. So I think we're

in a we're in a unique space where we

actually have a dual season market. So

we have summer um which is probably

actually a little bit stronger for us

and then winter. So um you know we're

when we were looking at a lot of other

properties including down in the Keys

and up in the up in the east coast and

stuff like a lot of those are single

season markets uh where you know you

really have like 12 weeks or so that's

like really good earnings. Yeah. Um, and

so I think it gives us an advantage

because it kind of flattens things out a

little bit. Uh, lets us, you know, so

April, April, May, and then probably

October, November, we generally operate

a loss. Uh, but the rest of the time

we're we're operating, you know, at a

profit. So, makes sense. A little bit

easier like then like nine months of

losses and then, you know, three months

of profit. But, makes sense. Well, I

appreciate it, Greg. Thank you for doing

this. Uh, it was very informative. Yeah.

Yeah. We have to bring you again.

There's a lot lot lot more. Stony has

more questions to ask. I do. I was just

gonna be just How do we get in touch

with you, Greg? I I'll send you his

info. I'll send you his info right now.

Thank you so much, mate. And definitely

you got a beer. Thanks, guys. Yeah,

guys. Thank you. Have a good one. Bye.

Bye.

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