Your Guide to Short-Term Rental Wealth With James Svetec

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00:52 Igor Kheifets

Welcome back to The ListBuilding Lifestyle, I’m your host, Igor Kheifets, and today I’m hosting James Svetik. James is an absolute pro when it comes to turning homes and spare bedrooms into profit centers of Airbnb. With years of hands on experience managing scaling successful Airbnb properties, James has helped 1000s of people transform their properties into passive income machines. James is also the co-author of Airbnb For Dummies and the founder of the BNB Mastery Program, where he helps regular people generate consistent income from short term rentals without the burnout of managing it all themselves. If you’ve ever dreamed about earning thousands a month from properties, even ones you do not own, you’re going to love what James going to be sharing today. So James, welcome to The ListBuilding Lifestyle

01:40 James Svetik

Thanks so much. Excited to be here.

01:43 Igor Kheifets

Yeah, we don’t usually talk about real estate, because I don’t like the idea of making money with real estate, to be quite honest with you, It’s too much legwork for too little money. I’ve been spoiled by The Online Marketing Game. I got my start in affiliate marketing, and you know, when you’re getting $500,000 commissions without leaving your home, without picking up the phone, you know, it’s just, it’s hard to convince me to go and deal with toilets, tenants and trash in return, for potential return on equity of the property that you own. So what about you? What’s your experience with real estate?

02:26 James Svetik

Yeah, so I got started about eight years ago now, without actually buying the property. So that was how I first got into it. Is I started managing properties in Toronto, Ontario, Canada, And I would basically just go to the owner, say, because a lot of property owners have that exact same issue that you’re talking about, where they don’t want to manage everything themselves, but then you introduce a property management company, and they’re not usually going to make you any more money, so now your margin just decreases if you don’t want to be the one actually physically going by to do anything at the property. And so when I got started, it was kind of like short term rentals were still relatively new. They weren’t brand new, but they were just gaining a lot of popularity. And so it was a pretty new concept to a lot of property owners that, hey, I could take this property that I have long term rental tenants in, and I’m currently the one managing everything to protect my margin. And along comes a property manager who says, Well, I can actually take care of everything for you. I’m going to do it on short term rental. And even after I take my cut of the revenue, you’re still going to make more money than you are right now, and you’re not going to have to deal with anything. And then the added bonus for them as well is that, like landlord and tenant laws in Ontario aren’t very favorable to landlords, so not having long term tenants in there was actually a big benefit to them.

So that’s basically how I got, first got started, and then we were naturally, it was not real estate investing, like the passive idea of investing at all. It was an active business where we would hire people and manage them, and have them maintain everything, do the cleanings, the turnovers, everything like that.

So that was my first kind of dive into it. And then only about three years ago, I started actually investing in buying the properties. And I mean, it’s definitely a lot of work, but the nice thing about it is you have the margin to outsource a lot of it. So if you either hire a management company, or, like, for me, I’ve already built management companies in the past, so I just had the systems, kind of the playbook ready to go, and then it can be a lot more hands off so that I, you know, I haven’t actually visited my properties since buying them basically!

04:33 Igor Kheifets

that’s really cool. I love that, I absolutely love that! So, what was your background before this? So you weren’t, like, born into Airbnb, so!

04:43 James Svetik

Yeah, before that, I basically had, so there’s a company in Canada called Student Works Painting and in the US, there’s a company called College Pro, that’s really similar, and the College Pro operates in Canada as well.
And basically what they do, is they show up at your university and you basically get, like, a clip board around your university lecture when you first get there, and you have no idea what you’re signing but you sign up on this clipboard, and then you get a phone call inviting you to an Information section.

And basically what it is, it’s really similar to, like a franchise model, where they basically give you, like a residential painting franchise. You’re going, like, imagine you’re painting people’s decks, their bedrooms, things like that.

But, because it’s all student operated, instead of there being a big franchise fee at the onset, where you, like, pay 20 grand to buy this franchise, they don’t do anything up front. They just take a royalty on all of your revenue.

So basically, as a student through university, I was essentially going and I was like, going door to door marketing for the paint jobs, doing the estimates, doing the sales, hiring other students in the summer to go and do the actual painting, the production work.

And so I ran that business for a couple of years while I was in school, and then I became a regional manager with them, which basically meant that I was just one of the guys coaching all those students that were coming in and had no idea how to run a business, and I would coach them on how to do that. And then, so that was basically my first dip into business.

And then in my final year of doing that, I also launched a watch business where I was making watches overseas, and then basically doing what I now know is called Drop Shipping. At the time, I had no idea what it was, and I launched it with this Kickstarter campaign. And then, basically, bought a whole bunch of inventory, wasn’t able to sell it, put myself in a ton of debt. And so that’s what led me over to Airbnb management, because I just basically realized, like one, I have no idea how to run a product business, but I know what to do to run a service business. And two, I had no money at all. I had a lot of debt, so I needed something like it start up without investing a bunch of money into it. So that’s what basically brought me into to Airbnb,

06:47 Igor Kheifets

Interesting, So you were always entrepreneurial!

06:51 James Svetik

Yeah. I mean, I kind of went to university, like I think a lot of people do, having no idea what I I wanted to do with my life. And then when I first got the opportunity with student works, I just realized I loved it.

And I was actually going to school studying business with like, kind of, like a concentration, I guess, you would call it an entrepreneurship. And I just realized like, “Oh, man, I’m learning way more about entrepreneurship by running a business than I am by going to a class and listen to a professor who’s never run their own business talk about entrepreneurship!”

So I just realized, like, yeah, entrepreneurship is for me,school is not! So I actually left school after two, like three semesters, basically, and then went full time into just running my own business ever since,

07:31 Igor Kheifets

Isn’t that incredible how we are expected to go to school or college or university and listen to people who never run a business or who were never successful at running a business. Tell us how to run a business? I’ve always found it to be just, not even, I don’t know, annoying, maybe not the right word? It just made me angry, because, how can you expect to succeed when you’re learning from a fake teacher essentially?

Now, don’t get me wrong, this is not very much different from 90% of, you know, make money gurus out there, you know, 90% of them who teach how to make money don’t actually make money! Aside from, you know, you giving them money for them to teach you how to make money, that’s like . . But I’ve always found it to be, kind of terrible, really! Because people pay a lot of money for college, like what’s the going rate for college tuition these days?

08:32 James Svetik

Yeah, it’s nuts, like, and the crazy thing is, people are putting themselves into debt to do that, and in most cases, you don’t have any real, like, there’s not actually going to be a return on that investment that you’re making.

And I remember it like really hitting me one time, like, when I was setting in, so basically I had this one, I did normal business like, you know, your accounting, your like, your systems and operations classes, like normal business classes, but I had one class each semester that was, like, entrepreneurship was the course. And for the first semester, the entire class was all about ideation, just, how do you come up with a good business idea!

And I remember sitting there being like, a business idea is worth nothing. It’s like, all execution, like, there’s million like, how do you come up with a good business idea? Just steal it. Just like, go and find something that’s working, and you do it, you know, like, it’s so like, it’s so, we don’t need to teach this for an entire semester. Just like, think of literally almost any idea, and you can make a business of it. And I’ve met people that have businesses that are, like, just the idea behind it is insane, but they execute really well and it works for them. So it’s like, I just remember seeing that and being like, “Man, this is not for me!” I felt the same way, just like, super frustrated. Why are we doing this? Why am I paying money to be here? Why am I spending time to be here when I could just be out actually building my business?

09:47

Yeah, and you’re right, and here’s why we do it, because at some point, sometime in the past, our parents got the idea that that’s the way to do it, I was just at a dinner the other night with two other families. It was me and my wife, my kids and two other families, and one of the families has a grown up daughter, she’s like, 17 or 18 years old, and you know, they’re like, getting her to go to college right now. And why is that? Because both of her parents have a PhD

Now, the problem is that both of our parents aren’t really making that much money. They’re working for some bank in Canada, and they have one car for the whole family, and that’s not a very nice car. They paint a pinch on everything, they, I mean, they really have to, because Toronto is really expensive to live in.

But the thing is that I asked this girl, I said, What do you want to be when you grow up, like 20 years from today? You know, looking back, you know, which decision you wouldn’t regret? And she started telling me about psychology or becoming a detective, you know, all kinds of stuff, even though, right now, her parents are driving home that message that she needs to become an accountant.
So when she told me what I’m like, I’m studying accountancy right now, and I said, “Oh, really, so you must like spreadsheets and numbers?” . . and she looked at me like, What? What are you talking about?

11:20 James Svetik

Yeah, It is a weird thing, right, where like, and I think for a lot of parents, like, I have a lot of empathy for it, or where it’s like, my parents, my mom got an MBA, and like, that was her ticket to, like, why her career was as successful as it was. It was like, largely just because she had that credential of the MBA, and that actually did pay off for her.

But then times change, I’m not my mother, I don’t want to go and do the same, the same thing that she did. So it’s interesting, right? It’s like, your parents just know what worked for them. And then a lot of time they’re just like, you know, really want you to be successful more than anything as their kid, understandably. But then, you know, at a certain point you’ve got to go, “Wait! I don’t like spreadsheets, I don’t like accounting I shouldn’t be doing this”, Right? Like, ultimately, I think, you know best as yourself, but when you’re young, it can be really hard to have the confidence to actually follow through on that and have that confidence in yourself,

12:18 Igor Kheifets

yeah, the confidence to actually go against your parents? And I think it’s only a fraction of parents who actually succeeded in what they’ve done, and with the life decisions they made, most of them don’t really have a good track record to show, and yet they still push their kids to do school.

For instance, yesterday, I was chatting to this all time friend of mine from a local coffee shop who is now back working at that coffee shop, and he was telling me about this government education fund that he set up for his kids, and he’s contributing $200 a month into this fund. And I said, you know, it would be great if the government actually created a fund for the parents can create, a tax free fund where the parent would contribute every month, and the government would add a little bit of money on top for the child, when the when the child grows up to start a business, right? Because, you know, that’s another reason why I think so many kids end up going to college and universities. Because, again, government encourages going, and their parents do.

But the truth of the matter is that, first off, not everyone is cut out for that. And second, if you really just examine what’s working and examine, I guess, you can ask yourself, what is the definition of success for you? I don’t think for most people, the definition would be something like waking up on a Monday morning, going to a job you kind of don’t care about or, and that’s best case scenario. You know, most likely it’s a job you hate, working with the people you don’t like and you don’t respect and you don’t appreciate and who don’t appreciate you. Where the boss is literally chasing you for clocking in 10 extra minutes on your worksheet, and, you know, and then coming back home not having enough money to just say, “To hell with it. I’m booking a trip to boat to Boca Raton”,

You know, like, I don’t think that’s the definition of what most people would consider to be a successful life. If you ask anyone, what would you like to do? The first thing people say is, what? I want to be healthy, I want to spend more time with my family, and I want to travel more! Now, how having a job actually helps with that?

14:38 James Svetik

Yeah, in most cases, not very much at all!

14:44 Igor Kheifets

But, I like the setup where you don’t have to own the properties that you manage and make money with. And I guess, you know, you started a long time ago. You said, what ten, eight years? Eight years ago! So is it still relevant? I mean, we’ve seen this done on many different levels. Now, a lot of people talk about, this year, unfortunately or fortunately, you’re not the only guy teaching this is either, so there’s definitely a buzz around co-listing I think it’s also cold and, it’s like that. So is this still a thing? Does it still work?

15:21James Svetik

Yeah, absolutely. Like it, it’ll work for as long as Airbnb is around, or any platform that ends up replacing it, even, right? Like the idea, the core fundamental idea there is, like, people are going to travel, they’re going to book accommodation, and they’re not going to always book hotels, right? And then the owners of those properties that they’re booking are not going to want to manage them, right? Like, there’s so many people that don’t want to actually be the ones managing the cleaning team, doing all the gas communication, all that! So it’s still a really good business model, and honestly, not even super competitive in a lot of markets, like where I own properties right now, I just have a team internally that manages them. But even if I wanted to hire a property management company, it would be really difficult to do so, just because, there’s not, it’s a more rural area. It’s like a kind of cottagey area, and there’s just not a lot of property managers up there. So there’s still lots of opportunity.

I think one idea that was really popularized years ago, that was never a really good business model, and it’s even worse now, was this idea of rental arbitrage, where you would rent a property and then flip it on to Airbnb, and in that scenario, you’re taking all this risk because you’re renting the property, and you have a monthly overhead that you need to meet, or you’re losing money, and you also have all the risk of like, if the government or the landlord comes And does any kind of thing, anything to regulate you and shut you down. You’re now left high and dry with a lot of debt!

So I think that model has always been bad, and now that rent has gotten more expensive in most places around North America, it’s even worse! So I’ve never been big on that. I did that initially and learned the hard way that it was a tricky business model to make it really work, and so got out of that quickly.

But I think, aside from that model, anything like, short term rental, whether it’s co-hosting or investing, they work. It’s just a matter of, like, just like many things, just actually running the business and executing on a file.

17:17 Igor Kheifets

Yeah. And speaking of regulation, the government, you know, for example, in Toronto, is really trying, like, for a few years now, I’ve seen that most properties downtown Toronto are not, like, Airbnb friendly, if you will. And those who do rent them out, they can almost play shadow games, right? They’re like, when you arrive, don’t speak to the concierge, Instead, head over to this place, and the key is going to be waiting over there.
And, you know, so it’s the government is definitely trying to regulate Airbnb. Is it the same way everywhere, or is it just in countries like in the Western countries, such as Canada, the UK, where the government is just a little bit more involved?

18:04 James Svetik

It’s not the same everywhere. It’s the same fundamentals everywhere, I suppose, but like, not the same end result.
So I think one lens that I view politics through, that makes it a lot easier to understand what’s going on and why! Is, like, it’s just a popularity contest, right? It’s all just like, hey, what can we do? That’s the most popular decision? And in Canada and Toronto specifically, there’s a housing crisis.

Now, if you tell people that we’re going to take all these Airbnbs and turn them into affordable housing, that’s going to win you popularity points. Is it going to work? Studies have shown, and statistically look at, absolutely not! Doesn’t make a difference. But it looks like . .

18:44 Igor Kheifets

since when that stopped the government from ?

18:48 James Svetik

Exactly! and so, if you look at, there are other areas where it’s actually politically popular, and because it wins you the popularity points to say we are going to allow short term rentals. So, for example, the markets where I’m investing in properties ,their local population will triple, quadruple, quintuple in the high season with tourism, and there’s like two hotels in the entire town, right? So if they shut down short term rentals, local businesses just suffer and die, right? Like there’s just no hope for any local business to survive.

So for them, they take a much more balanced approach to regulation. Where they go, Hey, we’re gonna make sure people are operating safely. We’re gonna make you get a permit or a license, you have to pass like a fire inspection, make sure you’re not jamming 20 people into a three bedroom home, that kind of thing! But they’re definitely not banning it because they would be voted out real quickly if they just squash tourism and all the local businesses just kind of shriveled up and die

19:46 Igor Kheifets

Yeah, I guess that makes a lot of sense. You mentioned that, at one point you went from making deals with landlords to owning your own properties. Well, What was your thinking There ?

19:59 James Svetik

Basically, there was a couple of things. One, there’s more margin in it, right? Like you, basically, if you’re managing for the property owner, you’re making your cut, and the property owner is also making their profit. If they weren’t making profit, they wouldn’t be doing it, right? And that’s through their cash flowing on the mortgage, and then they’re also paying down principal on the mortgage, and they’re also getting the appreciation. So if you can cut out that middleman, you can take both, and you get more profit, and you’re really not doing hardly any additional work, because when I was doing property management, I was taking care of everything A to Z, so the only additional work is actually going and buying the property and maybe a bit of renovation early on, when you first get it. So that was one motivator for it.

And the other piece is that, it’s one of the challenges with, I think, pretty much any kind of client, like, service based business, is just managing client expectations and making sure they’re really happy. And the challenging part is that when you’re managing properties for someone, you don’t get to control how much they paid to purchase the property. You don’t get to control what interest rate they signed up for!
So you might find people that bought this property way too high priced. They’re paying way too much on their mortgage, and they just need to be making more than the property can possibly make, in order to, actually be coming out ahead.

And so you end up where you can be performing exceptionally well for the property owner, and still have them breathing down your neck saying, We need more! Which is just frustrating! It’s just an annoying part of the business! And you can control for that a little bit by being selective about which clients you bring on, but you can also control for it a lot by just being the client that you bring on.

21:45 Igor Kheifets

I see, okay, that makes sense. Would you say that, I guess, were some things we need to know, some basics, the groundwork, for dummies, part of it, if you will, to get into a business like this?

22:05 James Svetik

I mean, on that same kind of strand, it’s like, Bring on the right property. If you’re managing properties, then bring on the right property is the most important part. And then if you’re buying properties, buying the right property is the most important part!

It’s just, the popular investing saying of like, you make money when you buy, right? So ultimately, if you bring on the right property, I always tell people, like, if you’re buying, you can buy the right property or buy it for the right price, and then make every single mistake in the book after that, and still come out ahead, because it’s just idiot proof, because you’ve got such a great deal.

Same thing is, if you’re managing properties, if you’re managing a property and you bring on one that’s making, it has the revenue potential to make $10,000 a month, and the property owner only needs to make five to be happy. You know, you have to really screw up big time to do it, to, like, not make money on that, or to have the property owner be unhappy with you, right? But if you bring on the property that you overpay for, or the mortgage is too high or whatever, then, like, everything needs to go perfectly after that for things to line up. So I’d say that’s probably the most important part, that a lot of people overlook.

23:18 Igor Kheifets

Okay, so we got to buy it at the right price. I’m sorry. We have to find the property that’s not overpaying, so you have margin? okay, well, what else do we need to know?

23:30 James Svetik

I mean, from there, honestly, there’s a lot of crossover with Internet Marketing World, where creating a really great listing on Airbnb or any of the other platforms you might list it on. It’s really just, like, if you have any kind of experience in digital marketing, you’ll take to it, like a fish and water.

And the nice thing is, you’re competing with people who have never even heard the term Digital Marketing, so it’s nice that way. It’s just like, having really great photos on listing, having a really well optimized headline that people are going to click through to, and then having your listing page, have all the answers to questions that a customer might have, like, what size is the bed? Is the TV a smart TV? How fast is the internet? Like, having all those answers really obviously available to people, in either the photos or the photo captions or listing description. Optimizing that is,like, pretty straightforward, and as far as, like, digital marketing is concerned. And then from there, it’s really just kind of an operations business. It’s all about just, like, managing your people and managing your team to make sure everything runs smoothly and that your guests ultimately end up being really happy. Because, again, similar to online e-commerce, like, if you get really great reviews, then the product will sell itself a lot more easily.

24:47 Igor Kheifets

Yeah, that makes perfect sense. And what about, like, Guess, picking the right area. Like, how do you know which property do you want to get involved with?

24:56 James Svetik

Yeah. So the cool thing is, like, there’s a website called AirDNA, right? And there’s a couple others, but AirDNA is kind of, the best and most widely used one. Where I can go and I can just look up, like, any single property in the entire world, and I can see exactly how much they’re making on short term rental, what their occupancy rates are, their average nightly rates, the seasonal fluctuations, all of that. It’s all tracked!
And then, I can look at market aggregate data as well, so that I can basically go and figure out.
Basically what you’re looking for, If you’re co-hosting, you basically just want to find high revenue. It doesn’t really matter anything other than that, like that’s your golden ticket, is just high revenue, because you’re making a percentage of that revenue. So the higher it is, the better off you are! And then, if you’re investing, then you basically also want to factor in the purchase price. You’re looking for the biggest Delta, essentially, between the revenue a property can generate and how much you can buy that property for!

25:48 Igor Kheifets

Interesting! So, it’s all about the top revenue?

25:51 James Svetik

For co-hosting, Yeah! It’s all about the top line revenue! Because you don’t really have to worry about expenses! That comes when you’re talking to the property owner.
When you’re talking to the property owner, you need to understand what their expenses are, but that’s not market based, because you might work with one person in that market that just bought it last year, and they’ve got a really high cost basis on the property. And then you talk to another person that bought it 20 years ago, and they’re, they have like, no cost base. Maybe their mortgage is fully paid off, or they bought it at such a low rate that the mortgage is completely insignificant. Whereas investing, if you’re buying it, then you do really have to look at the purchase price as well.

26:24 Igor Kheifets

Interesting. So, do you, once you find a property like that on your AirDNA, do you just pick up the phone, be like, Hey, would you like to make an extra $5,000 a month on your property and have no hassles or tenants?

26:37 James Svetik

More or less, yeah. It’s a pretty easy sell for the right person. Like, you either pick up the phone or there’s ways to, like, get in touch with them, messaging them, or you can even, I’ve even had people go and like, door knock and leave flyers at people’s doors. And that’s essentially the value proposition is, if you’re currently, it’s a vacation home and you’re not using it, it’s like, “Hey, you want to make an extra 50 grand this year, doing almost nothing, because your property is already sitting there vacant, furnished, ready to take guests, and I can just manage it for you?”

Or if they’re long term renting it, then it’s a little bit of a more difficult sell, because you have to say, “Hey, do you want to make a $10,000 or $15,000 investment into furnishing this place, so that you can get an extra $1,000 a month in your, like rent, so to speak”.
Or if they’re already short term, renting it themselves. And the value proposition is like, “Hey, do you want to not have to answer your phone at 7pm when you’re trying to have dinner with your family? How about I do all that for you?”

27:33 Igor Kheifets

I see, So either way, there’s a way in?

27:38 James Svetik

Yeah, Just depends on the person you’re talking with, and kind of, where they’re at, what their pain points are!

27:43 Igor Kheifets

Interesting! All right. Well, we’re almost out of time. So I do have one more question before I go there, if somebody wants to learn how to do this, where can they find out more about you and what do you do?

27:57 James Svetik

Yeah, just check out www.bnbmastery.com. That’s my main website, where they can check out everything about what I do. I will say I’m not super active on social media, but if they do want to just kind of, find me on social media, just search up my last name on Instagram. Not super active there, but it’s probably the most active spot!

28:16 Igor Kheifets

Got it! So, if you could go back in time eight years ago, just before you started this Airbnb thing, what would you tell yourself?

28:28 James Svetik

I would say, don’t even bother with rental arbitrage. Don’t make that mistake. It’s not worth it! You just do co-hosting. And I think one of the lessons that I’ve learned a few times along the way, that I had to learn one two many times. And I wish I if I could, like, kind of, rewind eight years and tell myself it would be to always be diligent, to not be climbing ladders that you don’t want to end up at the top of! Because I’ve kind of made that mistake various times throughout my journey in entrepreneurship, of like, building the business in a way that I never ultimately wanted it, and then I’d get to the top of the ladder, kind of succeed at it, and go, I just kind of wasted my time. I didn’t really want this extra money, or I didn’t want to have my business set up this way. I wanted more location dependence, and I should have just focused on that. So I think if I could somehow convey that lesson to myself eight years ago in a way that it would click and I would listen, that would be a good one to share!

29:26 Igor Kheifets

Interesting! Don’t climb letters you don’t want to end up on top of! That’s a new one!
All right. Well, there you go! James, thank you for spending this time with me. I really appreciate it. It was fascinating to look into the world of Airbnb co-listing. So thank you guys. If you want to find out more about working with James or about Airbnb co-listing, go to bnbmastery.com They also have an email newsletter, which is how I found out about James that I recommend you check out. And with that said, until next time we chat, have a good one.

30:06

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