#25 - Vacation Rental Entrepreneurship

It's a cleaning company to start. So we've been around this year. We were founded as we started cleaning just like some Haven properties specifically and grown to a decent side and just learned the operations really, really well. And that's something that we, I don't want to say already knew perfectly, but run a management company of a few 100 units, like definitely know how to clean things, definitely know how that works, definitely know what needs to be done. And so really now we're pairing that with how can we go into the self management market, provide them with a guaranteed good solution for their cleaning, which is like the number one thing and totally Facebook groups, like does anyone know a cleaner, the number one question.

So take that off their mind, but also in any way that we can be an advisor and help them with their investment. And just like little tips and tricks of, hey, here's a better way to do guest messaging. Here's a better way to do your check in process. Here's a better way to set up, you know, your vendor contacts, things like that that we just know how to do and think we can add value. That's really interesting. So I actually didn't like we haven't really chatted before this episode, so I didn't know any of this background. I I'm gonna make a convention here.

I thought Tentwell was started as like the the back door cleaning company that Haven would just use. But this is really interesting. So does Haven use Tentwell exclusively for cleaning? So not. Exclusively, yeah, not exclusively. We have other cleaning vendors that do a really good job. We have a really great team of of vendors and just like people we know who do a really good job cleaning. So there's a few that we use for 10 ball for sure. But yeah, the the vision is to really go into the self manager market with it and to be able to we're really early on that still, right.

So we're still like dial in some operations, but that's the vision behind it is like, hey, we see not really not much an opportunity for us, but like there's a need for this. There's a need for people to have, you know, a really high standard of a cleaning company with the experience and expertise behind it. And so one of our Co founders, Jordan, he is, he's worked for Haven for years and he ran the company with me and Dylan as well. And this is a full time thing now. He's very growing the business full time. Me and him are. And so it's been really cool.

Super super knowledgeable guy. Really, really smart. Dude, that's so crazy. Does that or do you see that as like 2 competitive entities or do you see them as complimentary? Like how does this, how do you think about that? I don't see them as competitive because the like, the reality is, is a lot of the self managers just are not going to go with a management company and or they can't afford one, even if they're like going to try it. And so I think it's a way to help another section of the market that there's a big need there. Totally. Dude, that's awesome.

I love that. Yeah, that's super cool. How has it been starting a new company in the last? Year it's been, it's been challenging, but it's been super fun. Yeah, it's, you know, through Haven we just learned a lot about what to do, what not to do early signs of detection on success and how to capitalize on those things and and just how to set up a a lean company that works really well, that has a really strategic vision. So we have really good cleaners that's, I mean hard thing to find like really good cleaners to train them really well. So we have great people on our team and really Jordan does a great job.

So having having him be able to start from scratch came to him with this idea. He was super excited about it and so it was great. From day one, we started rolling. It's been good. Dude, that's amazing. So if if you look back five years ago, did you ever think you'd be in these roles doing what you're doing now? No, I it's actually funny you say that. I think it was like last night I was talking to my wife. We were like, man, five years ago we were really in a different season of life. I, I mean, I don't even, I don't think I had a job and I was, we were trying to get married and we were looking at maybe getting married.

It was like such a wild, such a wild time. Now we've got, yeah, a couple of kids and just a lot happened in the last five years. Dude, that's nuts. And I know you said that Dylan's the real estate expert. Do you invest in real estate yourself at all? Or is it not yet? I've I've looked into it quite a bit. A lot of my friends, tons of my friends have actually invested in real estate. I've just been so focused on the business. So sure, like I know I really don't know a ton about. I have limited amount of time, right. So it's like I'm running these two businesses and I see him invested in like quite a bit of real estate.

And just to see like even if you have a full service management company that you own, like it's still a lot of time. And so I'm just like really dialed in on kind of one thing right now and just focused on it. And then, yeah, a bunch of our employees have also invested in real estate, had a good time. So I plan on it. Dude, that's awesome. Are you comfortable to talk through some of the numbers on the businesses? Yeah, we can talk through different numbers. OK. So I'm just really curious, like I've always envisioned management companies to be a really good business from a profitability perspective.

Is that directionally accurate? Like is it fairly easy to become profitable as a management company or is it still really hard? I would say it's, it depends on the kind of business you're trying to build, right. So, and the Smokies, there's a lot of 10 to 30 unit companies that are, are really kind of solopreneur, you know, endeavours with with contractors on the back of that. And so those are not overly difficult to create a really good job to create a, you know, a really good service based business that runs without the owners having to do everything day-to-day is, is still difficult, right?

Like any business, it's still difficult to build a company with a good a margin that's there that you have a really good trained team, that you can afford a really big full time staff that there's lots of issues with that. So yeah, I would say it wasn't super simple, but I, I would say like if you're just a guy and you're like, hey, I could just do this. I could manage 10 to 15 units and make a really good income, quit my job. And I think that's definitely feasible. Got it. But so you're saying it sounds like cuz haven net now manages how many units I?

Think we're about 265 or so. Got it, man. So just quick back of the napkin math. So let's say each of those units rents for, call it 100 grand. I don't know if that's on average fair, but. Yeah, it'd probably be less than that. But yeah, I mean, it's quite a bit of of rental income that we're dealing with year over year. And I would say the, the biggest challenge that we've faced over the past two years has really been the investor side of things. So it's been, it's been the real estate has been the big issue. So the first two years of moving into the Smokies, if you think from 2020 to 2025, I guess five years, 1st 2 1/2 years, business problems, right?

It's like we need to solve business problems. We grew quickly. How do we build a team? How do we train them Sops, how do we make the thing work? And so that's something that we did figure out. Now we're always learning like we could still have a long way to go, but we've got a really good base. And in the last half of the, the two years have been, yeah, the market real estate being really high investors and bad deals and like kind of navigate who are we working with That's been, that's been tough, that's been the, the more tough thing recently.

I'm sure. And so do you want to just give people, maybe for those who aren't familiar with the Smokies, just a quick background and like what the Smokies is and like what happened in the last five? Years. Yeah, the Smokies is, well, it's my home, so it's kind of weird for me. I'm from here. And so to me, I've just always been this, you know, a local place where we go in the mountains and I've always found Pigeon Forge like really odd. Like who would come to vacation here? Like we live, you know? And so it's just been interesting. So yeah, the last five years, you know, with the short term rental kind of boom and the real estate stuff happening over COVID, it really took off with people investing in short term rentals there.

And cabinets have always been there, right? Always. And they've really always been on like non Airbnb, like just just people like having their own cabin are in and out. We knew people growing up who did that. And so yeah, really saw like a ton of out of state and out of country investment into the Smokies. And it is a high volume travel space. So you have lots and lots of it's a big drive to market. It's one of the biggest drive to markets and it's a big market, right. So it's a hour and a half long drive market probably like total what does? What does that mean?

Hour and a half drive long. So yeah, you. Can drive like an hour and a half from one side of the market to the other. And like they're still short term rentals. And so, yeah, I mean, we've just seen a 10 to 20% increase in supply year over year for like 5 years. So it's really almost doubled since 2020. It's in the, I think it's close to like 20,000 registered I believe or something. It's, it's a lot of short term rentals here and a lot of that is building, a lot of it's converting. So just tons of outside money pouring in that's on the real estate side and the management side.

So yeah, most of Haven's competitors have been either bought out by private equity or, or our private equity or nationally owned or something like that. And so, yeah, last five years have just been a whirlwind of, of people seeing an opportunity, trying to capitalize on it early, pouring a lot of money into it. And honestly, if you did it at the right time in the real estate, like, yeah, you made a lot of money. People were making tons and tons of income here. And so, and it's not like you can't still, but now it is. It is much more competitive.

And so finding a really, really good property, it's going to cash flow well, making sure your numbers are right, making sure you're able to, to brand it uniquely and work with a good management company or manage it yourself, whatever you need to do to make it work is is super important. And so we still see, you know, the uninformed investor coming in saying, hey, my 4 bedroom should do $300,000 because it did it in 2021. Like that's not, that's just not going to happen, you know, And it's, it's been a difficult reframe to get people into that mindset.

Totally, totally. So as most of your business on the on the property management side, is it new investors coming in, is it retaining current business like what's the majority of of your customers? Yeah. So we do have a a larger group of our portfolio that's been with us for a while, like who've been here since before the boom or bought like right on the uprise and have really good deals. And so we've been working with them for a long time. A lot of our business in the last year and a half has came from, yeah, people getting into the market and a large portion of that has been switching from other management companies, honestly.

So the bigger part of that has been, hey, I bought this in the last 24 months and I've been with these companies and didn't work. So now we're coming to you. That's been where we've seen most of it. Got it, got it, got it. OK. And then on the 10 wall side is that a lot of people that are coming from all property management companies being like, hey, I this doesn't pencil out like I need to self manage this. Yeah, that's what the idea is. But I actually think the first wave of of self managers that we're really going to see flow in more going to be like, hey, I've been self managing and I just need a better cleaning solution.

And then we'll just be able to help them do that at 1st and then just kind of apply what we've been to Haven and then just build from there. So yeah, it's that's kind of the vision that we see for it. And then over time, yeah, when people realize that they're in a deal that they can't afford and they are gonna have to self manage to figure all this out by themselves, like I think that's where we can provide a lot of value. Totally. And it's almost like as people are exiting, even if it's Haven, you can say, hey, like I totally get where you're leaving.

Here's a solution on your way down. Yeah, yeah, sure. That's. Really interesting. That's really interesting. Did who? Who came up with the idea originally? I mean, we, we always were like, it'd be cool to do a cleaning company one day, but we put it off for probably 2 years. And the original idea was just to just do cleaning, right? Like we just wanted to learn cleaning into it. And so as the market shifted, I think we saw more of an opportunity and a need. And so we were able to kind of jump on it quickly. And so I'd say it was a combined effort between me, Dylan and Jordan just kind of putting our heads together and saying this could be something good and Jordan having high expertise and and just the market in general being like the perfect person to start.

Yeah, yeah, 100%. That's awesome. Yeah, that's awesome. So I guess looking forward to the next, call it, five years, Where do you see or what do you want Haven to be? What do you want Tim will to be like? What are you looking to do in the next five years? For Haven, I would. I mean, we'd love to grow the business, but we really want to become a staple for a trusted management company here in the Smokies. And so it's that's really the goal is to just put roots down and really be the company here that's trusted. And we provide high value. And even if you're an investor struggling in your journey, like we can help you with that.

But every time you come to us, you know that you're going to get, you know, a high level of value. So we're really going to be a trusted name. We've been working on that for a long time. And the 10 ball side, I would say it's essentially the same thing, but we were going to help people. And so I and the same for Haven, but I don't have metrics yet to necessarily they're necessarily put to that. But I'm thinking like the KPIs that I want to see over the next five years, like how many investors have we helped with their investment honestly? And I think that will translate to, to success for us if it translates to success for the owners.

And so that's the that's kind of the goal over the next five years, build these businesses, make them very trusted in the market and see how many investors can we help with both of them? Because I do think it's a, it is a big need, people getting into properties and they just don't understand kind of what they're doing and there's lack of education around it. Totally, totally, totally. And I mean, I think you know that I, when I got into the short term rental market, it was like at the peak of 2021 and it was a lot of what you're saying like you're looking at deals and the numbers.

It's like it's unclear what people mean and the definitions are kind of different depending on who you talk to. And you're looking at you're like, I don't what? Like what does this mean? What? What is? How do you evaluate this? Yeah, it's tough. I mean, I still don't have a good a way to tell people how to look at a deal, honestly, like other than talk to us, right? We can give you, but it's also hard. Like, why would you believe us? I understand that, right, Right. But it's, yeah, if you just pull it up on air DNA, it's like it's, it's crazy how many times I've pulled up our properties on air DNA compared to like real production and just how much, how far off, you know, this really is.

Are you usually above or below air DNA? Does it depend? It could be 50 to 100%. Either way, it's it's, it is just a shot in the dark. It is a total shot in the dark. And so I don't, I don't know if you're aware of key data, the data company. So it's a professional management data company. They're actually a really big company. I don't know for the size of air DNA, but they're pretty large. So professional management companies buy into this data set and they aggregate it all together and it's all anonymous. And so it's per market. So we have access to that data and all the other thousands of of professionally managed properties in the Smokies do as well.

So we're going to compare against the market. They're really, really well. And so that's where we're do a lot of our comparison is on that data set because it's a little bit more trusted and we know they're, they're legitimately real. Like this is pulling from the, you know, the the PMS system itself. And so it's like very well connected data there. And so, yeah, year to date against the market in the Smokey's havens of just under 30% ahead of the market for revenue. So I know that we are significantly out earning the market. And so when I see these air DNA numbers, I'm I'm comparing these, I'm like, this doesn't make any sense.

I don't know how they're coming up with this. It'll be very scary to buy a multi $1,000,000 investment off of this right? Yeah. And so do you wanna break down just like a couple metrics that investors can use when they're looking at short term rentals, cuz it's a bit different than long term rentals? Yeah. I mean, Rev par is a really, really good number. It's hard to kind of explain what that is. I'm sure a lot of your listeners may know what that is. The best way just to like conceptually think of it is just revenue. So I love to just frame that way for owners of like it's revenue per available night, revenue per available room in the hotel industry, right.

But essentially like, yeah, out of the available occupancy, out of the ADR, what is what was the property booked for? What is that number? ADR being average daily rate right average. Daily rate, yeah. So average daily rate's a very scary number to buy an investment off of because I could set a one bedroom at $1000, right? And that's that's going to book. And so it's just a very yeah, it's been that that would be the big thing is like look at what the Rev Par maybe or get a quote on like, hey, what do you think Rev Par is across these months for this bedroom count?

You can ask the management company that and they'll give you like the number itself. It's a very helpful number to know. And then, yeah, getting really good revenue production quotes. So does it include cleaning fees? What is gross revenue when you're hearing it? That's a billion dollar question. That's a big, big problem. And so that that is a billion dollar question. Like we do not include cleaning fees and gross revenue. A lot of companies do. And so there's like why are you guys, you know, $10,000 off or something? It's like you're not going to get any of this money, right, Right.

So, yeah, I would say just asking those questions, what does gross revenue include? What is the Rev par for the bedroom count? What are my carry costs and and how tight will that be? How much left to pay a management company if I'm doing that? Really taking in being really conservative on that stuff is is the way to go. Totally. And so just to break down a couple of things we just talked about, because I think it's really helpful. Like gross revenue usually is thought of as like top line, all of the money coming in for a property, right? And so in the short term rental market, sometimes, like when you, when you stay at an Airbnb as a guest, you pay the the nightly rate and then you see that cleaning fee and then there's some taxes and like all this other stuff, right?

So theoretically that money is going to the owner or the manager. So some people include that as their gross revenue because it's oh, it's, it's revenue we collect. What they don't say is that .7 seconds after collecting it, the cleaning fee goes out the the occupancy taxes go out. So like it's not true revenue as as the owner that you're seeing? Yeah, absolutely. So just to do some quick math here, like some some large places, let's say it's a really big place. It has a cleaning fee of like $750, which should be quite a bit, but there's some really big places in the Smokies.

Yeah. So if you have five turns a month, right, that's that times 5 * 12, that's $45,000 a year in cleaning fees. So and that obviously the cleaning fees may not be that high, right? You need to check that. But I mean, if you're getting quoted 150 to 200,000 and it includes cleaning fees, that's a lot of that money is. Going to be a big swing. Money you're just not ever going to get and and it's also gross revenue before you pay a management company, which is another big thing. Now, if you're using one or you're not using one, obviously it's up to you, but a lot of people will just kind of buy them and then decide.

And it's like you need to definitely factor that into the deal, right, Right. Have have you ever played around with like some sort of revenue sharing model on the Haven side? Like I've always been super interested in this as the investor of like. I would love. To partner with a management company if we could agree to some sort of Rev share. So like you get 50% of like net profits. Obviously you would need to know like what what the holding costs are. Like you need to understand a little bit more of the D itself, but like just to ensure that like yo, if, if we win, you win or vice versa.

Yeah, that's a super interesting idea. I actually haven't thought too deeply about that. But yeah, we definitely need to know all of the the cost behind it, the investment side of things for sure. That's a really good incentive. 'Cause you're, you're basically like partnering with the owner. So it's it's a lot more risk on your side. Yeah. You would be surprised at the amount of investors who will not tell us their details of their investment. And I'm not, I really don't know why, but it is a very touchy subject here in the Smokies. And so we are at the point now in the sales process where we essentially require that and we will, we do lose business because of it.

We're like, hey, we've had people take out $4000 a month he locks to buy a house. Like this is not, we need to know, you know, are you going to be here in three months? And we need to know what kind of situation you're in. And so we, we do start doing that now. So that's helped us a lot just to see where people are at. But it's also opened our eyes to see that there's a lot of people that are, are not going to make it work. So that's a super interesting model. I'll have to think more about that. Let me know if you ever want to do it. Yeah, for sure.

So kind of with that, do you see like the future, are you, are you bearish or bullish on the Smokies as a as a real estate market in the next 5 to 10 years? That's a great question. I really don't know. So I do know that if you have a really unique property and you're a certain type of investor, you're going to win either way. So I do know that like the travel will continue here, right, It's a good market. So it doesn't matter how many listings there are if you're at the top tier of that. One thing Havens done really well is we've been able to get Airbnb listings into the top 10, five, 1% of worldwide homes on the platform, which has just seen essentially up to a 40% increase in visibility on the platform, like just a huge jump for visibility revenue.

And a lot of that's on a really, really good properties that have, you know, really good design, really good partners. And so there's opportunity there, absolutely. Now the opportunity of, of buying a log cabin built 20 years ago and doing nothing to it and putting it on the platform that's basically gone, right? It's really not going to work. But I will say it depends on your situation, right? If you buy it all cash and you're going to be OK realistically. And so it's, it's so dependent on the investor and how they're getting in. But the, the kind of quick money social media aspect of the Smokies.

I, I do, I do think that's over. I think it would be smart to make money here, but it is one of the biggest markets in the, in the country. I mean, Airbnb just came down here and met with me in person two weeks ago when we were all the data about all the big markets. And yeah, the Smokies is, is growing and supply is also growing in demand. It's definitely a it's growing, all the problems it has, it's still a big attraction market and people still want to buy and invest in it and people will be able to do a good job. So over the next five years, I think the smarters smarter the investors get, maybe interest rates come down a little bit as well could help.

I think I could be bullish. Yeah, totally. That makes sense. And dude, it's so cool because you position yourself as no matter what happens, people own property in the Smokies. That's a thing. That's like a fact. So if more people own property in the Smokies, Haven wins. If more people own property in the Spookies that they can't afford to have a management company, 10 well, wins. So I think it's like a really cool position that you put yourself in. And yeah, I'm just like, I'm very fascinated with like, I love that thought process and like positioning.

I think it's really interesting. Yeah, we'll see if it really works right. It sounds really interesting. Yeah, Yeah. No, I think it'll be good. I think we've, I've talked to a lot of self managers, right. I mean, I've, I've had the opportunity running one of the bigger management companies in the Smokies to be able to talk to to hundreds, if not at this point probably 1000 or more homeowners and their situation and where they're at. And so I think I have a really good pulse in the market. And so I do think it's going to be a great offering. Yeah, yeah.

See, that's super exciting. That's super exciting. I kind of want to start wrapping things up here. But as you know, as you're building these businesses, are there like, I want to switch it to a little bit more personal. So like, are there like books that you read or habits that you follow to like 'cause you're doing a lot? Like your day must be fairly packed. So like, how do you structure and organize like a typical Tuesday in your life? Well, Tuesdays are my meeting days actually, so that might be a bad. Wednesdays. Wednesdays. Yeah, yeah, yeah.

I packed Tuesdays full of 15 minute back to backs from start to finish. And then I grind it out on Tuesdays. But yeah, so like a Wednesday or any other day, I, I'm definitely working out in the morning every day. I sleep, I try to sleep a good amount. So I'm not, I'm not like a 4:00 AM wake up guy or anything like that. I'm not doing anything crazy. I wake up 6 between 6:00 and 7:00 depends on when the kids were up or when they went to bed, but I want to be fresh. I got to work out and then I really just start working. I don't have a huge formula for it.

I have before in the years like had a better To Do List formula or a better calendar formula, you know, and so, but I've really been trying to say, OK, over the next three days, like what is the most important thing I do? And I'm only going to do that thing. I'm only going to work on it until it's done. And so that's been huge, especially starting a new business tend well, like there's a lot of just like stuff you guess you got to do. You just got to do it like no one's going to do it for you, right? Running a larger company like Haven's nice because I have a big team and so my job is to not everyone not be reliant on me.

Like I want to empower others. And so with the new business, that's the future for sure. But there's a lot to do. So it's really just putting my head down working through it. But yeah, it's, it's looking at time available during the day with the family from 9 to 5 is really when I'm working the most. And so I definitely do work before that and after sometimes. But my goal is, is how can I optimize my time between that time? Because I'm gone, I'm away, right? So if I'm away, I want to be as dialed in and as focused as possible. I don't want to waste time.

I don't want to be walking around the office or, you know, I mean, I want to be friendly and have conversations, but like, I'm here to work and then I'm here to go home and be able to use that time wisely. So that's very, very vague principles I follow that I am always trying to adapt to do better at that and and find ways to to, to do more in the time I have. But totally, yeah, it's been, it's been cool to try to try to put it together. I got friends who do better job than me, but better entrepreneurs, bigger entrepreneurs who who are a little bit more focused.

But focus is the hardest part. Totally. Yeah, I hear that. Are you, do you consume like books, podcasts, like or what do you, what types of stuff do you like to read or listen to? Yeah. That's a great question. I consume a lot. I I'm usually doing audio books for podcasts quite a bit. So there's actually one I started to recently. It's called Founders by Yeah, that dude is that's a. Good one. He's insane. He's amazing. Yeah, he, he does some like really good details of like how people work. Super interesting, right? And so that's actually where I think the one he did on Elon, he was talking about kind of that idea of, of solving one problem at a time, which is really helpful for me to think through of.

Like he just doesn't quit until it's solved. Like he's not going to do anything else until like this problem is solved and then we'll move on. It's really cool to see. That one's great. Yeah. 10X is easier than 2X is a really good book that I read and just recommended to someone, another entrepreneur pretty recently. He just finished it. Not sure if you've read that one yet. I do not know, but it's called 10X is Easier than two X. It's not Grant Cardone's 10X. It's not that one, right? It's a different one. It's, it's a really good, practical, like super, super good book.

Yeah, man, I could pull up my, my Audible account real quick. I basically just splurge on on Audible and just buy, oh, all of Alex or Mosey stuff. Gosh, listen to like everything he's done. Read all his books. I've got his $100 million playbook right here that I've been working through. There's a lot of books in that he's, he's really practical and you can like figure out I have this specific business problem and he solved it and I'll go see how he solved it. So, yeah, it's usually whatever problem that I'm in is where I'm looking for resources to solve those issues with whether that's, yeah, helping customers.

And a lot of books about just like how to give customers the best experience is how you win a business. It's like there's so many business books and entrepreneurial books about how to make money. But yeah, there's a lot of books and podcasts just about like the Raising Cane's guy. It's like, I just want to make the best food and then people will like it. Yeah. And that's all the chicken. Finger Dream. Yeah, yeah. The chicken finger dream, like it's all he cares about and he's super successful because of it. And so that's been good to kind of reorient my mind and like I want to provide the best service possible in our market.

And like that's the stop. And then what comes from that was ideally, you know, some success would be great, but that's the goal and then we'll see what happens. That's awesome. I love that. I love that. Well, dude, I could ask you 1000 more questions, but I I really appreciate your time and thank you for chatting with me today. And where can people find out more about you, your companies like Give a give a link where people can reach out. Yeah, they can find me on LinkedIn, Jack Zappa, or they can go to havenvacationers.com and I've got some couple of videos on there.

That's something I've been trying out recently. It's putting up new videos on the site. I'm trying to detail listings and just like help people out some blogs on there. So yeah, come check us out. Awesome man. Well dude, thank you so much again. I really appreciate you and your time and looking forward to chatting again soon. For sure. Thanks, Jeff. Alrighty, see ya. Bye everybody.