Ready to unlock the door to short-term rental success?
This week’s guest is Alon Orbach, an expert in vacation rentals managing over 500 properties and leading an investment firm with a portfolio worth over 150 million dollars. Alon shares his journey from Israel to South Florida, discusses his shift from property management to vacation rentals, and offers deep insights into the complexities and opportunities of the vacation rental market.
He emphasizes the importance of understanding local regulations, the need for a unique and high-quality guest experience, and the challenges of managing such properties. Alon also discusses the practical aspects of financing, the due diligence required for investments, and offers advice for those new to the real estate and vacation rental industry.
Key Takeaways:
- 03:15 Understanding the fundamentals of short-term rentals and why they’re a lucrative investment.
- 07:40 The importance of conducting due diligence before selecting a market.
- 11:25 Financing strategies: Avoiding common pitfalls in short-term rental investments.
- 16:10 Evaluating markets for high demand and profitability.
- 21:30 Hidden costs and how to manage operational expenses effectively.
- 25:50 Local regulations and compliance: How to stay ahead of legal challenges.
- 30:45 Building your team: Essential roles for managing a successful short-term rental portfolio.
Whether you’re a beginner or a seasoned investor, this episode is your go-to guide for thriving in the vacation rental industry.
Connect with Alon@:
- Contact Number: 305-206-4345
- Instagram: https://www.instagram.com/orbachrealty
- YouTube: https://www.youtube.com/user/alonorbach1
Connect with Corwyn@:
- Contact Number: 843-619-3005
- Email: corwyn@corwynmelette.com
Shoutout to our Sponsor: ROBYN COLLINS
Do you want something more? More Meaningful Moments opportunities, deeper relationships and memorable experiences? Do you want to make a difference? If you say YES, a career and real estate could be the opportunity you’re looking for guiding people to one of the most important decisions they ever made, the purchase or sale of their home can be both rewarding and lucrative.
Exit Realty has a revolutionary compensation model training and technology that provides you with the tools you need to start and build your successful real estate career. Call me today ROBYN COLLINS with REDROBYN HOMES at 843-557-5003. Again that’s 843-557-5003 or visit RedRobynhomes.com/join.exit and make your Exit today.
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ROBYN:
Do you want something more? More meaningful moments, opportunities, deeper relationships, and memorable experiences? Do you want to make a difference? If you said yes, a career in real estate could be the opportunity you’re looking for. Guiding people through one of the most important decisions they ever made, the purchase or sale of their home can be both rewarding and lucrative. Exit Realty’s revolutionary compensation model, training, and technology that provides you with the tools you need to start and build your successful real estate career. Call me today, Robyn Collins, R – O – B – Y – N Collins with Red Robin Homes at 843-557-5003. Again, that’s 843-557-5003 or visit us at redrobinhomes.com/joinexit and make your exit today
CORWYN:
Hey, good morning. Welcome to another fabulous episode of Exit Strategy’s radio show. I am your host, Corwyn J. Melette, broker and owner of Exit Realty Low Country Group in beautiful North Charleston, South Carolina. So guys, if this is your first time listening to this show, as I say about every week, you’re in for a treat because our mission here is very simple. That is to empower our community through financial literacy and real estate education, guys. We’re legacy building. That is what we do. So I want to give a quick shout out to our listeners who tune in from all over. Guys, you guys local in the Charleston area who listen to us on 106.3 WJNI with Jesus Nothing’s Impossible. Guys, thank you so much for tuning in. Thank you for those who listen to us around the globe who tune into our podcast every week. Guys, we appreciate it. We would be remiss if we didn’t say thank you for not only tuning in, but for also sharing our content and the information with others. So guys, today I have the investor’s show. Okay. Today we have with us a investor who does this thing. You don’t do it for play. Now we have with us today Alon Orbach. He is in South Florida and he is a guru on vacation rentals, currently managing over 500 properties. He leads an investment firm that has over $150 million of real estate and vacation rentals in their portfolio. Alon, how are you doing today?
ALON:
I’m doing great, great. Thank you for having me and I’m really glad to be here.
CORWYN:
Well, look, first and foremost, give our listeners like the 50,000 foot view of you, who you are, what do you do and why you do it.
ALON:
Awesome. So I’ve been in the United States for about 18 years. I moved from Israel. I initially came here to actually play volleyball and I got into school. My major is in economics. I always knew throughout my life, doesn’t matter what I do, that I want to end up doing real estate. Then when I finished school, I actually got into property management and I managed roughly about 300 units. And when I got to a point that I felt like, okay, I reached a certain limit. I cannot manage more because you only have 24 hours in a day. And I didn’t feel like I can grow from that. So I actually took a break. I moved to California. I opened a few coffee shops, had a pretty good business, pretty good run. And I decided to move back to Florida to do real estate. When I got back, Airbnb wasn’t really exist at the time. And I started doing some flips. I started doing, again, property management. But at this time, I also did the real estate side of it, meaning to find the deals and also to do construction, renovations. And I really got my foot in the water and tested a lot of stuff. And the market, I got to a point that my investors, they used to get, let’s say, 8% returns, which is great. I couldn’t find them anything for long-term investments anymore in Florida. And I said, okay, but what’s next? I need to… Real estate will always be here. And that’s how I got into the vacation rental market, of course, that I got in touch with other people who are my partners. And we assembled a really, really good team. And we became a really big company into the vacation rental. That’s 95% of the time right now that I’m doing. It’s only vacation rental. We’re doing it in South Florida. We’re also doing it in Tampa, and we’re looking to expand into different markets.
CORWYN:
So that is impressive. So you guys focus primarily on vacation rentals currently, yes?
ALON:
Yes. We’re currently focusing on vacation rentals. We are always adjusting to the market, just like I did with the long-term investment to short-term. Even within the short-term, you always need to adjust. And there are so many different variables that goes into it. You need to know the rules in each city. You need to make sure that you’re not going to buy a property and next month the city will tell you, well, you cannot do it anymore. Some people buy in association areas that the association allow it, but they can change the bylaws after a few months. There is this aspect, but then there is also the aspect of how to make sure that you’re being unique. And what do I mean by that? When we started with the vacation rental, it was still in its diapers in a way from business perspective. I mean, yes, it was there for a few years, but not so many people bought properties to actually make money from vacation rental. It was still at the early beginning. And the houses that back then we bought was houses between, let’s say, $400,000 to $700,000 or $800,000 in an area that is, let’s say, a five to 10 minute drive from the beach, four bedrooms. And those homes were doing very well. They were doing great returns, like 15 to 70% returns to investors. And everybody were very happy. But then people start buying it also. People don’t even have a clue about managing Airbnb. They just say, okay, let me buy and make some side hustle. The market became saturated with the same type of homes, the four bedroom homes that have a pool and look nice. And the occupancy rates start going down. The ADR, the average daily rate, start going down. And we said, okay, what’s next? Before we start actually not necessarily lose money, but from 17 go down to, let’s say, 12% or 10% cap rate, what is our next destination? Because the market is appreciating. We cannot keep buying those properties for $400,000 to $700,000 or $800,000 because now it’s like $800,000 to $1.4 million. We decided that we want to do something unique that nobody else is doing. And that’s to buy homes that are actually in kind of like suburbs, to find the acre lot properties, the four to 5,000 square foot homes, and do a whole inclusive amenities filling to a house and add all the amenities to it. So now that’s our main focus. That’s where we specialize and unique. We’re buying those acre lot. We’re adding tennis courts, like, well, pickleball courts. Now it’s the pickleball thing. We’re building pickleball. We’re doing beach volleyball, soccer field. We’re doing basketball field. And inside the house, if there is place, we do movie theater. We’re really doing like an experience that if a family come or a group of friends are coming, they want to stay in this house for the whole vacation and really have a vacation experience. And that’s why we can do it further away from prime locations that are touristic because people want to stay there. And then they’re saying, OK, we’ll stay in this house, have a blast. If we want to go to the beach or want to go to a main city, it’s OK to drive 20 minutes.
CORWYN:
So you guys focus on kind of consider lifestyle. And what I mean by that is outdoor activities, community, all those things. Those are kind of things that you focus on as you’re seeking to identify properties. And Alon, we got to get back and definitely talk about those rules, regulations and all that stuff there, because I’ve seen that mistake made count. Yes. But what I also heard it is that you guys focus on properties that have amenities already situated close to amenities so that people can enjoy the outdoors or whatever their thing may be. Does that sound right?
ALON:
Yes. So back then when people rented a home, usually it was, let’s say, a family that they’re traveling and they’re saying, OK, for the months that we’re traveling, we’ll rent our place and just make some money out of it. And when it start becoming a business, the guests that are coming to the homes, they demand a five star experience. Even if you’re in a three star area, they’re going to want five star experience and people are complaining. And nowadays, if someone is complaining, let’s say to Airbnb, they can close your account very fast if you’re not delivering good experience to the guests. They can give you fines if you don’t get good reviews right now. Nobody’s going to book you. It’s becoming such a big thing to it’s like a full time job and it’s not just nobody can do it now as a side hustle. It’s not possible. Even if you only have one house, it’s going to drain you like your time and it’s going to take a lot from you. So we are definitely trying to give the best experience possible. And we notice that people really willing to pay a bit more to get those experiences.
CORWYN:
And so that’s one of the things that going back to a couple of things that you touched on and people sometimes really don’t grasp the undertaking with this stuff. Again, running a short term rental, whether you do it on Airbnb, VRBO or any other platform that may exist for this kind of stuff, it does require a lot more than what many people assume. They think it’s easy. All I got to do is this. Well, no, you got all these other things to do. I recently stayed in an Airbnb and the experience, I mean, overall, the place was nice, but the owner’s response and experience afterwards, the customer level of service was completely in my opinion, my opinion obviously matters because I’m the consumer, but it wasn’t a good experience. Let me put it that way. So I made note of it. Okay. I’ll remember you next time. I didn’t go through anything else of trying to make it an issue or whatever. That’s me. But however, the experience just wasn’t good. That’s one of the things that we have to be mindful of is that you do have the consumer. But let’s go back to one of the things that you talked about previously, which is making sure you’ve done your diligence. You buy on a property, you buy a property, make sure that the area is, because there’s some places where you can’t short term rent a property, right?
ALON:
There are cities that you cannot do Airbnb at all. So obviously that’s the first obviously giveaway that you have to check with the city before even looking to a new property to see what the regulations are, if they allow it. So they cannot just cancel it within the city, but they can give you a lot of hard times with changing some rules. For example, Hollywood, Hollywood, Florida, of course, Hollywood, all the homes at the beginning, you could buy it, you rent it, you get the license, no problems. After a while, when so many neighbors start to complain because they had a really nice neighborhood that so many people start renting their houses around and there are noises at night, everybody complained to the city and the city is, OK, what can we do to fight it? One of the things they did is actually hire a third party to get the approvals for the people. And that company, if you bought a house, for example, in 2024 right now, let’s say you bought a house in 2018, you had a vacation rental until 2021, for example, and three years, no problems. You have a business. The new company comes and they’re like, who did this kitchen? Do you have a permit for it? And you’re like, well, I have it for three years. I bought it in 2018. That’s how I bought it. And I’m talking about like when it’s actually the case. I’m not saying that you bought it and did stuff without permit. Like you bought a house, you used it as a business. And three years after someone is telling you, I don’t see a record in the city that you have permits for it. So now you have to re-renovate the whole area and bring it up to code and stuff that you never plan about spending. So the city is giving you really hard times. And some people that don’t do it full time job as a full time job, all of the sudden for them to start now dealing with the city and dealing with permits and dealing with expenses, they’re probably going to decide, OK, let me just close it. I don’t need this headache. I don’t need this business. And that’s really like one area. But there are so many there are some cities that a few years after the fact, the city said, well, you cannot rent more than six bedrooms in the city. You can buy a 5,000 square foot home, nine bedrooms. You cannot rent all of them. And some have a maximum occupancy. So they tell you cannot rent more than 12 people in each time. Or you cannot. There are some cities even telling you cannot rent to more than one family. So let’s say you’re coming with your friend. In theory, again, I’m saying it in theory, you cannot rent it. So a lot of people, they’re trying to argue some the neighbors, which is another reason why we got into the acre lot. So it’s much more isolated. It’s much less noise to the neighbors. But in the areas that are pretty close, meaning that the neighbors are pretty close to you, they will complain right away if you have noises. And then the city call you, the police will go there and then the guests will complain to you that the police came because they heard some music or stuff like that. So many stuff. And also the association I just had recently, we actually closed on that house. But just to kind of show how the diligence work. So we’re actually now that when we’re signing a contract, we’re asking the seller to sign that there is no issue. And obviously it’s not a part of the contract. And we did this contract and then it went to our title company and they did a search, a title search. And they come to me and they’re like, you know, there is an association. And I’m like, there isn’t. I checked it like 20 times. So what we found out is that there isn’t an association now. But the builder, which was like 30 years ago or something, when he did the development, he did a bylaws that there is basically an assembly of association. Now, nobody used that. And then we found out with more investigation that years after, a year prior to us signing the contract, it was completely dissolved, like association structure. But all that stuff. And they have zero regulation against Airbnb. But still, because once a neighbor complain and, you know, someone in the board can really destroy you.
CORWYN:
So that’s interesting, because I recently had that similar experience and HOA when a property was developed, an HOA association was established, but there was never any like money, anything. Right. Well, properties have transacted in that area forever. No HOA. OK, well, there’s bylaws, but there’s no HOA. Sell a property in there. Two, three years later, here comes a company. So essentially, there always has been a HOA. The residents got together, did whatever they did, didn’t tell anybody. They hired a company. The company says, well, all these people owe all this money for all this time period. Oh, they started sending out bills to people like, wait a minute, there’s no HOA here. What are you talking about? And then the funny thing is there’s no records. And see, that’s one of the things that as especially when you’re doing short term rentals, like you said, obviously what you’re doing with the consumer on the front end is you’re having them acknowledge, sign off, give you disclosure. There’s no HOA, because if there is, then you’re not interested because you don’t want to have to go through the rigmarole, all the other requirements sometimes to get approval to be able to short term rent or do what you want to do with the property. However, sometimes they do exist. That is the reason why you have a closing attorney. That’s the reason why they do title searches. Yeah, you do all the due diligence and then you can still in the next stage find out for sure. Exactly. Gotcha, gotcha, gotcha. Alon, let me ask you this question. Obviously, what’s the pain points, pinch points that you’ve experienced in doing what you do? What are some of the most difficult parts?
ALON:
I think the adjustment is always when you’re a company that is relatively big. Obviously, it’s different obstacles versus a smaller company because a smaller company will focus on one area. Us, we have to grow to different parts to keep making the same returns to investments or at least the best returns we could. So one of the biggest obstacles is to find a new market and not just to find like one house, because obviously to get into a new area that you need to have a management company in that area and have a cleaning team and the construction. So you need to have a good team, a strong team in a new area. So if you find like one house, it’s not going to be enough. You need to make sure that you’re able to buy, let’s say, up to 10 homes in a certain period, of course. So to find those new areas that have 10 homes available that will work for vacation rental and it’s legal, it’s a lot of work to find those areas because we’re going through so many different areas that sometimes you think right away, oh, that’s amazing area. But then to do the correct analysis with the pricing of what’s the price of the house versus the ADR versus the occupancy rate and to make sure that the city allow it and then to make sure you have enough houses you can buy. And it’s just so much work. I’m flying in about a month from today to Texas to actually identify a new area for us. And just to get to that point of flying to Texas, it’s months of work to do so much due diligence that when you’re getting there, you pretty much know what you’re looking for. So that’s like one of the obstacles besides the stuff that we already talked about, which is the legality of things that you need to do in the due diligence period. Another thing that I can tell you is a big thing when you’re looking into the more high end homes is that if you’re looking proper only for investment side, the more bedrooms you have, the better. I mean, that’s a fact. We are always thinking about the resale value. And to be honest, most people don’t really need eight bedrooms when they’re buying a house. Like usually the people that need the most are like five to six. Like usually that’s it’s very rare to find more than that that has like enough demand. And when we start adding rooms, we saw good returns in some of the homes when we try to sell them. The flow didn’t work because then we have a beautiful four thousand, five thousand square foot home that the master, for example, doesn’t have a master closet because for us, we don’t need it for rental. But when someone want to buy a house for themselves later on, they want the master closet. They want the flow to be more open space and stuff like that. So that’s also something that we notice that is also really important to think on what’s in five years, not just like right now how to make money right away. And that’s something that I’m sure I can find a few more things that are like you have to face when you’re looking into a property. But that’s pretty much like the most important things with to know how much rooms versus the size of the house versus the resale. And of course, the rules and regulations and then to make sure when you get into a new area, especially now also facing with the high interest, even though it went down a bit, it’s still pretty high. So should we buy cash? Should we buy financing? I do want to talk actually about the financing as well. That’s super important. A lot of people that buy for themselves, they will most likely put 20 to 25 percent down. That’s the reality. They want the convention alone and they’re going to put that. Us as a company, we put at minimum 40 percent. And then after all the work that we put into the house, it’s usually 50 percent LTV. The reason why we’re doing it is because it’s very important not to over leverage yourself. And I can tell you that people who bought homes a few years ago and leveraged themselves to the max with, let’s say, 20 percent, they’re losing money today. And if you bought the house at with 40, 50 percent LTV, we’re still doing pretty well. And that’s really protecting us from failing in properties that in some seasons can make a little slower income. And that’s also to us very important thing that I think a lot of people are not really looking into.
CORWYN:
All right. So let me ask you this. And Alon, I call this kind of my it’s a hindsight question. We all got a clear view of what we’ve done versus what we’re doing. If you had to start all over having the knowledge that you have now, what you’ve learned thus far, what would you have done? If anything, what would you have done differently?
ALON:
So I think that the answer will be for a very specific date, because my answer today will probably be different even if I have the same knowledge in one year, because the whole market will change in one year. So then my answer will probably be like different what I will do today. But what I will do today, for example, I had a podcast with a guy from Mississippi that doesn’t know much about real estate. He has a kind of like a dream to get into it. And I actually did a live webinar. I wanted to tell him right away, OK, let’s say I’m in your shoes. I don’t have any properties. I don’t have much money. What am I doing now? And he live in a specific area that Mississippi, they have big lots. So the homes there were around 400k, give or take. And I told him, OK, so the area, right, you live in a specific area. The homes there are around 400k. Let’s see what Airbnb is doing in your area. There were two homes that were guest favorite, which guest favorite now is like relatively newer feature in Airbnb. It’s really pushing you higher in the search rank. So to me, the fact that there are two homes that are guest favorite, it means that there are two homes that are working pretty well. So I dug into them with him, showing him how to know pretty much what the price that they’re charging. And then you do a certain ADR average and occupancy rate. And I saw that in his area, if I’m buying a house right now, I can get probably roughly and that was a very fast analysis, roughly 17 percent, which was outstanding. And you don’t need to invest that much money for a 400k home. And then let’s say with all this stuff from the side, furniture, stuff like that, let’s say it’s another 100k. So let’s say you need to bring out of pocket 250. So let’s say a person like that saved $50,000, for example, and that’s all you have to invest. You need to have some money, right? If you have zero, you can still make something. But it’s very hard. So I told him, listen, if you’re doing your due diligence in the new area, like to you, it’s a new market in Mississippi, but do all the homework, know how it works in your area. I told him like what properties to look into. I told him probably contact those managers for those properties and ask them, tell them you want to buy a new house, ask them maybe to manage it and to give you an analysis. So for people who have zero experience. So let’s say I’m starting from scratch and let’s say you ask me what I’ll do with my knowledge. But I’m saying let’s say I don’t have the knowledge and I’m starting from scratch. I will make sure that I find someone who can help me in a way that if it will work, you will get business from me. But at the same time, it still doesn’t cost me money to just ask him his opinion and how much money you think this house will bring. So let’s say for now, I’m still not spending any money. I’m getting some knowledge and then I find a property that I think will work. Now, I don’t have all the money. Let’s say I have $50,000 that I saved and I will find someone besides a lender, of course, because you still need the lender. But I will find someone that will put the remaining, let’s say, $200,000 cash and I will tell him, listen, I will do everything. I have the house already. I will get the furniture. I’m going to do the management or I’m going to be on top of the management. And we’re going to split 50-50 the profits. But he’s going to put the $200,000. So if I don’t have money and I’m starting from scratch, I will need to find someone that can put the money. But I wouldn’t start from a $2 million property because that’s super hard to find an investor to trust you if you don’t have experience. So if I do have the experience, I will go to those $2 million properties and do all those stuff that I mentioned already with the amenities. But if you don’t have experience, I think that’s great. Now, from the other side, for people who don’t have money, and that’s a super important topic that I talk about a lot, is that I have friends that they know what I’m doing. They don’t have a lot of money and they’re telling me, hey, I saw these YouTube channels. I’m not going to mention names. I want to do sub to to basically rent a home from someone and then sub list it on Airbnb. And all those YouTube channels, they tell you how you can make another $1,500 from the side. So they’re asking me for my opinion. And those are people that usually already have full time jobs. So it’s not like they’re thinking to change their profession, a job, and they want to make an extra $1,200 a month. I told them, look, it’s possible, but most likely it’s not going to work for you. If you just find any house that will agree to you to do it. People don’t think about like furniture. We are spending $85,000 on homes for furniture only. So let’s say smaller homes will probably cost you about $30,000, not less than that. If you’re renting now a house, it’s going to take you at least a year just to cover the furniture. And they don’t know anything about regulations and licensing. What’s going to happen? So let’s say you have a double booking for the same day. A checkout is usually 11 a.m. A check-in is 4 p.m. So first of all, you need to do this right away. Let’s say you have a good cleaning crew that you find. Okay, you send them. There is a table broken. Who’s going to replace it? You have to replace it before the 4 p.m. comes and you need to make sure it’s clean. If you do it as a side hustle, most likely you’re not going to find it. What happened if there is a leak? What happened if the people just come in and there is they found like roaches in the house? You need to find an exterminator to come within 30 minutes to an hour, not the next day. It’s not like long term that you’re just, okay, I called the guy. He’ll be there. So all those stuff I found super important because, yes, because you could put 50,000, let’s say, and get a business running. Yes. But if you have no experience, I would not suggest to just jump into the water because you could lose the 50,000 that for you is like your life saving. And I also told those people, probably I will suggest to find a company that really know what they’re doing to manage it. Let’s say they’re going to take all your profits, 20 percent. Let’s say usually it’s what they take. Maybe you can find for 13 or 15. They’re going to take all your profits. So you’re going to make zero. But you need to shadow them. You need to learn the business. You need to know what channels do I post the house? What does it mean? Dynamic algorithm change of pricing, because I still see a lot of people that have the same price every day. Doesn’t matter. It’s the weekend, weekday, busy months. There is so much stuff you need to know. What happened if you have low review? Can you change it? How do you change it? If you really want to be good at something, make sure you do all your homework to be good. And honestly, if you don’t want to be good at something, don’t do it.
CORWYN:
That is very fair. So, Alon, we have quickly come to the end of today’s show, and I want to thank you for that, because that is a tremendous amount of insight for people who are considering thinking about or otherwise want to explore getting into real estate investing as a whole, but specifically getting into short term or more vacation rentals. Because many of us live in markets that are conducive for that type of business. That type of investment provided how and best to get it done. So I want to thank you for giving that insight to our consumers.
ALON:
Yeah, it was a pleasure. I really appreciate it.
CORWYN:
And I want to thank you, Alon, for being part of the Exit Strategies Radio Show family. So, again, thank you so much for being on with us today.
ALON:
Thank you, thank you. I appreciate it.
CORWYN:
So for our listeners guys, y’all know how I feel, ya know how I’d say, ya’ll know how I always put the two of those things together. And I deliver it to you this way which is I love you. I love you. I love you. We’ll see you guys out there in those streets.
