Episode Transcript
[00:00:02] Speaker A: This is short term rental management, the show that is all about short term rental property management with your host, yours truly, Luke Carl.
Welcome to the party. It is a party, and it is a Tuesday morning. If you're listening in real time. And I love you, man. Short term rental management, it's a good time all the time. Today we've got a guest. I've got a guest today.
Branching out from being by myself and preaching it, we got a gentleman named Stephen Patasky. He's done a pivot, and he's starting a new property management company based on a whole lot of prior experience in the business. And I think you're going to dig his story and might have some information to help you out on your journey as well. Hey, don't hesitate to reach out to me. I do want everybody to know we sell vacation houses. We have a team of real estate agents, number one team worldwide. Three years in a row at exp. Over $3 billion in real estate sold. And that is called the short term shop. And of course, my wife is in charge over there, Avery. And we would love to help you on the purchase of your next vacation home. And of course, you come hang out with me and I'll teach you how to, how to rent it out. Cause I'm the world's greatest landlord. Loudmouth Luke. Short term rental management.
If you like what you're hearing, if you're picking up what I'm putting down, you can join me on a live weekly call to talk about your next short term rental or ask questions about the one you already have. I am live once per week on Zoom. I would love to have you come and say hello. It's strquestions.com.
that's strquestions.com. come and join us.
Welcome, welcome, welcome. Short term rental management.
All things vacation rentals and property management and landlording and becoming a better landlord and getting higher gross income and all of the fun stuff. And today I've got Steve Pitaski, who's got a fantastic backstory. He's been in the business a long time. And I'd like for you to start there, if you don't mind. Steve, go back to the early days and kind of walk us through your whole journey in this business.
[00:02:14] Speaker B: Yeah, for sure. Look, thanks for having me on the show, by the way. I appreciate it and appreciate promoting short term rentals. It's a great business to be in. So, yeah, 18 years ago, my wife and I, she was pregnant with our first child. We have a boy and a girl and I remember thinking back then, a bunch of our friends were like, oh, man, the travel is going to suck for you guys once you have a baby. It's so hard. And taking my airplane sucks and nothing really works. My wife and I love travel. It's kind of what brought us together. And we just couldn't believe that travel was going to become a worse thing for us. We couldn't imagine it outside of our lives. So we thought, well, what do we need? What would we want to travel? I went through the three options. One is you go to a hotel, which obviously gives you the certainty. And as a new family, certainty is very helpful to know what you're going to get. But a hotel room is no fun. Especially it takes the romance to have a baby in a crib beside your bed in a 400 square foot hotel room. So that kind of killed that. Then there's vacation rentals. This is like pre Airbnb days, but you have Vrbo, and this is a time when things were horribly inconsistent in 2006 in terms of you never really knew if the pictures you saw matched up with the experience. And as a new family, absent of having that consistency, we just couldn't do that either. The third option is buy your own home. You get to set up exactly how you want, have all your things there. But we wanted variety and we had no money, so buying our own home really wasn't an option. But it was something we could think about. We thought, wouldn't it be amazing if we had 30 properties that we owned ourselves and we could set them up exactly the way we want, like playpens and booster seats and baby monitors and great linens and great kitchens. I love to cook.
And then we know exactly what we're going to get, and we have equity, and that equity can grow. And we thought, great, this sounds awesome. We just need $30 million. How do we do that? So we actually started a fund. We went to 18 friends and family, everyone put in a couple hundred grand each. That's pretty much all we had. And we bought, raised three and a half million bucks, bought three homes, placed in Maui ski summer property in western Canada, and then a place in Scottsdale, Arizona. And that became kind of our fractional approach to vacation homes. We acquired them, bought them all with cash, set them up exactly the way we wanted, and the 18 partners were able to share those homes. We all got a couple of months a year to kind of spread between the various assets, beach, golf, ski summer, and it was really cool. We didn't know really where it would grow. But it kind of got some traction, and we end up building a team. We end up raising $100 million over the next seven years and bought 50 properties, mostly western us, Latin America, Caribbean, Tuscany, and grew the thing pretty big, and it was a lot of fun. Had a whole concierge team, asset management team, and provided about 20,000 vacation experiences for these 400 investors. And it was an awesome run, and it kind of brought us to where we are today, which is, as of three weeks ago, we had our last vacation in that version. Call it 1.0 of Luxus. By the way, Luxus is the latin word for luxury. So it's like luxury vacation properties. And we decided to do a pivot when Covid hit really hit us hard in Canada in particular, that everything locked down, and we give us a chance to pause, and we decided to exit the, call it fractional or co ownership space, and we're moving into the vacation rental space. We're good. We had a great team, have all the right people to run it, and now just comes down to saying, maybe we can apply this brand standard more globally. And obviously, we'll talk about that today because I'm pretty passionate about it. But we're into the version 2.0 after 18 years of the first one.
[00:05:43] Speaker A: Fantastic. So back up to the first version. This is fascinating stuff. This was quite a long time ago, I guess. First, explain to me what your role was in that. Were you the management?
[00:05:55] Speaker B: We were the management. So basically, we set up a structure, like a general partner, limited partner structure. And so we were the general partner there by the manager of all the properties. And then there was an unlimited amount of limited partners. We had three separate funds involved, $30 to $35 million each, raising money 100 to 200 grand at a time. Like, one family would take a piece of that fund, and they, based on how much equity they put in, would give how much time they would have allocated towards that property portfolio. And so my job was really. I mean, when we first started, it was like you had no office. We're in totally different careers, and it's all coffee shop meetings. But we struck a chord with these initial 18 people that said, geez, that's what I'm missing in my life. I don't want a whole property right now. I want a part of a property. I want a trusted manager. I want it set up the way that I want it set up. So I know when I get down there, it's got all the things that I can be comfortable and what I. My expectations are met. So the snowball effect happened. I mean, there's about 50 people in the industry at the time. In zero six, early zero seven, we were the smallest. We were 50 out of 50. And then we actually grew to become the largest in North America within this relatively small industry in terms of an equity based model like this, because a whole bunch of other companies were loading up with debt and they got crushed during the great Recession, and we were buying with cash. So we did very well, and we had a. We had a good run, and we had a team and hired some hotel folks and helped us build this whole, you know, concierge service experience and management component to make sure that our partners got what they expected. And it was a lot of fun.
[00:07:29] Speaker A: What year was this? Give or take, the very beginning, very.
[00:07:33] Speaker B: So late zero six. So, yeah, our son was born in February 20, 2007, and we literally launched that month, you know, so it was all came out of this situation of, like, second trimester. We're trying to plan our travel when we had a baby in this world. And so early zero seven was the kickoff and founding of Luxus group.
[00:07:52] Speaker A: Okay. And was it like. It sounds a bit like a timeshare. Were these people getting a return?
[00:08:01] Speaker B: Yeah. So this is where people get, you know. Cause we were sharing ownership. But the difference with a timeshare is you own deeded time. This is actually, you are a partner. So think of it just like a syndicate going about a multifamily, and you put ten people in the syndicate and you spend $5 million. The difference is that in your situation, you probably won't want to live in the multifamily. In our case is that there was all this a syndicate, the same way you'd structure any type of investment syndicate of ownership. The difference is, instead of renting it out for a return, the return was the usage of the assets by the partners. So that was the differentiating factor versus a timeshare. You don't really own anything. That's why there's 50% commissions. That's why they generally go down. But the concept is similar, sharing ownership of an asset. It's just that you get a chance to use the asset, which is the fun part.
[00:08:48] Speaker A: But they were getting an actual return on the rents as well, or just using the properties.
[00:08:52] Speaker B: No, that's the difference. So there was no rents except that all of 100% of the operating costs were divvied up proportionally amongst the partners. So everyone. So the funding of the day to day management, the property, utilities, the concierge, all those aspects were split up amongst the syndicate. So again, maybe the easier way to look at it is. You mean three bodies put 200 grand each and buy a million dollar home, and it costs 100 grand a year to run that home. We all got a $20,000 bill to use that home. So that's the most limited. Like, the true baseline of it is thinking of four buddies or five buddies buying a home together. We don't rent it out, we purely pay into that home to keep the operating costs. This is just scaled to $100 million in 50 homes.
[00:09:33] Speaker A: And so you didn't rent them out at all?
[00:09:35] Speaker B: No, it was purely like a private club for vacation homes.
[00:09:38] Speaker A: When you exited, I would assume you made quite a big chunk there on the sale of the properties.
[00:09:43] Speaker B: Yeah. So that was the good side of it is obviously when you, you know, it was more of a capital preservation appreciation play, and then you get your. The good thing is there's kind of two points of the return, like how much the capital could appreciate during that life cycle, like roughly ten year cycle of the assets of growth. But then the operating costs to be in the group were a lot less. To rent a comparable property, it was about 25%. So if I. It cost me roughly. If you were to average about $250 a night in the early stages to rent, to use the homes, but it would rent out for $1,000 a night. So you kind of get, as a home, as an investor, you get the delta. Instead of renting that Maui condo for $1,000 a night, your operating costs were only $250 to $300 a night. So that's like the return was a combined. When you combine the two together. Like, I have one partner, for example, for 13 years, he got a million dollars of value on his $150,000 investment because he traveled all the time and used all of his time up. And then the asset appreciation was pretty good.
One of the funds obviously grew in value. The thing is, we're constantly reinvesting capital back in the homes to keep that really very, very high standard for the investors.
So it wasn't the capital side, wasn't some big, massive home run, but when you combine it with the usage side and the value they received on them, it was a great return for all.
[00:11:01] Speaker A: How did you pick the homes? These were in exotic locations.
Was there a collaborative effort there, or was that your job?
[00:11:10] Speaker B: It's a great question. It was my job, but we definitely took a collaborative approach. So we would always poll our investors and say, hey, we now have Hawaii, Southern California. We kind of have the basics down. Where else do you want to go? And I'd be like, you know, I really wouldn't. I'd like to be Costa Rica or Caribbean. So then our job was to go out and find destinations and homes that ultimately would suit what we believed our partners profile wanted. So the more exotic we went, we went to, like, Costa Rica, Caribbean, Tuscany. The more, I would say, safe and selective. We had to be on the assets because our partners maybe are used to going to Hawaii and it's comfortable and you know what you're going to get. Or Florida, you go to Costa Rica, it's a little bit more, I don't know, scary, a little more exotic. So we would pick engaged communities that have significant amenities, and it was just a lot of fun shopping over those years. You know, we didn't.
We'll go in. You get a chance to buy with cash. Obviously, the market was pretty low, so we had lots of options and. But you really want to get it right? We didn't get it right all the time, but I think we did pretty good job all over to create experiences that our partners wanted to have in these really special destinations. Then our team took care of everything for them. So they go to Costa Rica. We'd have the driver lined up or deliver their rental car to the house, their private chef. So we have this really high level, curated service component so that when they got there, they weren't just, like, guessing in terms of what to do. So we're pretty proud of how that all shook out.
[00:12:37] Speaker A: These are starting to sound like uber wealthy people. These are screaming to crop people here.
[00:12:42] Speaker B: Well, you know, it's a good point, and the answer is no. So our average home value would have been probably if you blended everything together between kind of one to 5 million. But what it actually did is so they weren't like these ultra luxury homes. You divide that on five to six people per home. It's only, you know, $200 to $300,000 investment on an average. We had one fund. There's a little more luxury. The other ones were kind of one to 2 million. So it was actually more like aspirational luxury. A lot of our partners, some of them absolutely were uber wealthy. This would be like their I. Their fourth home option. But it actually opened the door for a lot of people to stay at a home that they probably wouldn't rent themselves or couldn't afford to rent or be a stress for them when they got access to this really special experience, because they only had a one 6th ownership of every asset. So it opened the door, instead of being maybe the top 1% income earners, it opened the door for the top 10% income earners to access this portfolio of homes, because it was a fractional approach. So that was pretty cool, because for all of us, and my wife and I included, we're a great example. We didn't have that type of money to spend a $4 million house. But now, in a syndicated format, we did. And we had some of the best vacations. We had the best vacations of our life as a result of that. And memories that it would have cost us three, $4,000 a night to rent. And that was way out of our price range. So this kind of opened the door for people in that top 10% bracket to travel at the top 1% or 0.5 at 1%.
[00:14:05] Speaker A: Is it a little bit like flex jet, for lack of a better. Again, I don't know how to compare this to anything, but it's almost like a net jets.
[00:14:12] Speaker B: Net jets would be a great example. Yeah, netjets. So it's a perfect example that this is. I'm glad you asked that. This was very much pioneered by the private aviation industry, this type of fractional piece where people don't want to own a whole jet. So you buy a one eight or one 16th of a jet, but you get access to that portion. You pay your operating costs, and every time it goes in the air, you pay when you're flying. So the industry is very healthy on the fractional jet program, and so very much. Certainly, fractional ownership has existed for a long time, but in a syndicate of homes or a fleet of aircraft. Private aviation has been very much a pioneer of this aspect.
But I'll be honest, it's a hard industry. There's not a lot of us in the world.
I think this is a great thing for your listeners.
I think there's a huge opportunity, but you really have to have a really strong friends and family group out of the gate. We're exiting it because we have an aspirations to get to hundreds of luxury vacation homes. And raising capital at that scale is hundreds and hundreds of millions of dollars. It's challenging, but if you wanted to build a portfolio of five or ten or 15 homes, anyone can do this. Go round up ten or 15 friends by two or three homes, and then you become the manager, and you could start to build your own portfolio of owned vacation homes. You make a management fee on Bao that you charge your group. You never lose money. You never make a ton of money because you have this consistent management fee coming through and how we structured it was we got a piece of the appreciation at the end. So if there's a viewer listener on here that says, hey, this is pretty interesting, you know, I'm going to raise $3 million by three $1 million homes, and those homes are worth 6 million, let's say, in ten years from now. You know, generally 25% of the appreciation goes to the manager and 75% goes to the partners. There is a chance to have a windfall at the end of this kind of seven to ten year run. Whatever lifecycle you put on it. And even though we're exiting the business, I'm a huge fan of it. It just comes down to the scale that we're trying to grow now isn't congruent with raising capital at that scale.
[00:16:12] Speaker A: So you still own a few of those houses now, or they're already in.
[00:16:16] Speaker B: The final stages of selling them off. So we already sold about 60 million worth, and we're in the last, I don't know, probably 20 million worth of real estate, and that'll probably all be sold up in the last six months that we'll be officially out of that side of the business.
[00:16:28] Speaker A: And this. So this. You've had these homes for a long time?
[00:16:31] Speaker B: Yeah, we have. Yeah, we have.
[00:16:33] Speaker A: Did anybody exit the situation?
[00:16:36] Speaker B: So the cool thing about how we structured, I'd recommend someone else to do it. Other groups tried to do it with no fixed exit date. We did ten year cycles. There was this automatic ten year trigger that we had to create a disposition event to exit people at that time. So everyone bought in with the mindset, I'm in this for ten years now. There's always things that happen within the ten years, sadly, death or divorce or something that happens financially. And so we had a process in which they could sell to a private buyer if there was demand for that. But generally speaking, you buy in for the ten years, you're in for the ten years, and then we have this liquidation event, which we're going through now on our last two funds, and everyone gets their proportionate share of equity as we sell the assets.
[00:17:15] Speaker A: I see, I see.
[00:17:17] Speaker C: This episode of the short term show is brought to you by the short term shop. If you're interested in buying a short term rental in one of the top vacation markets in America, just go to theshortermshop.com and click get connected with an agent. If you purchase a home with the shop, you'll have access to all of our client only benefits, such as training on how to manage your short term rental. So we'll teach you everything you need to know, from how to set up your Airbnb and Vrbo list to how to use the property management software that you'll need to streamline your business, all the way down to helping you source your local boots on the ground like cleaners, candy people, etcetera. We've taught thousands of people just like you how to buy and manage their vacation homes from anywhere in the world. So head on over to theshortermshop.com and click get connected with an agent to get started. I do have to mention that we're brokered by exp or else I get in trouble. We'll see you guys over there.
[00:18:08] Speaker A: Would you do this again?
[00:18:11] Speaker B: I am personally, I'm mentoring a couple groups on this right now. For them to launch. For me personally, no, because where I met my, our business cycle, I mentioned briefly in the pre call. But we've got. We're working with four seasons and Marion on some ground up development opportunities. We have a development division as well. And we're really inspired by this hotelier approach to vacation homes. And we'll talk about that maybe next. But when it comes to this, we're out of it because we didn't want a distraction from this next ten year growth cycle. We're going to try to build this hopefully very significant business.
But I'm a massive believer in what we were doing. It's just that if we had a bunch of these funds and syndicates competing with this other product offering, we just felt we wanted to go all in on one thing.
[00:18:54] Speaker A: But there wasn't like a lot of money to be made here, right? Or was there on the exit of the property? Or was it just mostly just kind of for, for vacation purposes?
[00:19:03] Speaker B: Well, it's. Yeah. So, no, for an individual investor, if we think there's two things, the managing partner, the person starting it, and the individual investor. The individual investor is where they get their value is, you know, two things. I'm parking 200 grand and I think it's gonna work 250 or 300. I'm not looking for like a three banger or this is gonna go way up. There's. This is about like capital preservation and appreciation. Advantage for them is, again, to rent those homes versus the cost of operating those homes is substantially higher. So if, let's say their travel budget was $20,000 a year, you know, and they would get 20 nights for that. So $1,000 a night, the same 20 nights in Lexus, for example, cost you about five to $6,000. So it's like, oh, jeez. Instead of spending 20 grand a year, I'm spending six or 7000. That's a true cost of operating those homes. As a partner, I'm saving $14,000. So I just had another $14,000 return on my $200,000 investment. I got another 7% return on that investment.
So this is less about making money. It's a lifestyle investment, capital preservation appreciation. I'm saving money on my travel. If you don't travel, you never invest in this. But if you travel a lot, it does actually pencil up very nicely. From that perspective, from the managing partner perspective, how I would recommend people to do it. We didn't do it perfectly, but you basically have a fee structure where you get a little bit upfront when you raise capital. So you're out when with your hustle and building all the marketing documents, you make a bit of money there. The industry average is 20%. We were a lot less. We were like 7.5% to 10% on the initial capital raise. And then you charge a management fee for running it, like a cost plus or some fixed management fees. You're making money every year. It doesn't add up too much until you get to some level of scale by ten properties. But you make something, and then at the end of the day, hopefully these properties, you've chosen the assets well and they appreciate and you got a slice of that. So the person who's kicking it off, there's kind of three sources of revenue.
Two that can be certain, and one that is based on whatever it grows to financially, which is good, though, because you want accountability as the managing partner. You're selecting good assets, you're buying them well, because you're a steward of that person's capital and you want to make sure you're trying to pick the best assets that have the best chance for a great experience, but also for great appreciation. So for a guy doing a one, you know, when I was a one person shop, we grew to a ten person shop.
You can make some money and it's a lot of fun. And the investors have a great, great experience and they make some money too. And then if you want to do, you know, half, you know, to 100 million dollar or billion dollar company, no one's been able to do in the world yet. So I wasn't going to be the one. But can you grow to become an eight figure, nine figure assets under management? Absolutely.
[00:21:47] Speaker A: And this, this was your day to day, was making sure that this place was killer. Like ready to rock, had all the cool shit and all that kind of stuff. What did that look like?
[00:21:56] Speaker B: Yeah, that was the fun part. You know, I think, you know, we always, we got feedback as we went along how to make it better and better, but we just took the baseline of my family. So what are the things as a young family we need? So, you know, first set up play pads, booster seats, you know, for women, like hair grooming utensils, put like salon grade hair dryers in so you don't have to pack an extra suitcase of stuff because you don't know what's going to be there. And then you have pool toys and you have board games. You have back in the day dvd set. Obviously now it's different. And you'd have all sorts of things. A fully stocked liquor cabinet, kind of pay it forward setup, so the partners would use some and restock with others. So we had a lot of these things that made it feel like when you walked in, aside from having your own suitcase of the physical clothes you need to wear, you didn't need to bring anything else. And that was the fun aspect of it. And it's a really fun culture that we built around that aspect with our partners. And they got a chance to enjoy the homes as if they were their own, because they were their own, just via syndicate versus via single ownership. So you can set up the homes that you want. Now, people, I know some companies put cars in the garage, boats in the marina. There's various liabilities and things associated with that, additional costs, but you can make them as decked out as you want, depending upon the size of the home, the luxurious of the home, I guess. But it's totally up to what the group wants. For us, that was kind of, we made it so no matter where you went, you knew what you're going to get and you had a crap ton of fun while you're staying there.
[00:23:17] Speaker A: All right, cool, cool. So then you're now transitioning, it sounds like, into just full on property management. So tell me about that.
[00:23:24] Speaker B: Yes. So the big, I guess, pivot for us came during COVID So in the US, our peers within this industry thrived because the US is such a. They have everything. You ski properties. When your borders were shut, people could still travel and do these. Our peers crushed it during COVID we were the opposite. In Canada, things were completely, completely locked down and our partners couldn't travel for like a year. So we stopped raising money and we just paused and we. It was really frustrating. You know, it's frustrating for us, frustrating for our partners. And we, as a manager, me and my wife and our team had to decide when this Covid thing stops and the borders open up, are we going to go back to this business we've done? Or is this the time that we can allow these events to happen, pay the money out and start something new? And I think what we aspire to, Luke, was we wanted to. We're really proud of the brand standard. Like, we knew the joy that our partners got staying in their home and, like, the mental freedom they had when they were going to homes, that they knew what they were going to get versus the mental anguish. When you book a home on Vrbo or Airbnb, you really don't know what you're going to get till you get there. Some hosts are great, like, phenomenal, and a lot of hosts are really crappy. And there's no way that Airbnb can fully control, you know, 6 million doors around the world. So in our case, we thought, let's. Let's bring this to the world. And the only way to bring it to the world is we have to get out of ownership and we have to get into management. And then we have an infinite amount of scale. But in every single home, we apply this Luxus standard we spent 18 years developing. Same linen, same pillow, same towels, same hairdryer, same bath body wash, same kitchen setup, same electronics. So when someone comes to Luxus now and you can go to luxusvp.com dot, we just had our soft launch a week ago, so it's a very timely call. We're going to grow to 30 to 40 properties in year one, and then we'll be growing at 50 to 100 properties a year from that point on. And think of going to, I don't know, Marriott in the sense that when you are booking, we have a rewards program for our most loyal guests or for all of our people traveling with us. And no matter where you go, Cabo, Hawaii, eventually Destin, Florida, Tuscany, you're getting the same experience. And we want. When someone books with Luxus, they know what they're going to get. And if we can help, people have that certainty. That's why people travel. If they get loyal to airlines, they know what they're going to get, or they travel to hotels. It doesn't exist in our space at a global level, and that sounds global, like this big thing, but we want to get to four to 500 properties and then allow us to pay a jumping point to something bigger. And then ideally people travel with us and they don't need to travel anywhere else unless they're going cruising or exotic vacations. But we ideally have 30, 40 markets around the world. They can pick their adventure, and we can guarantee certainty, and that's what others can't. So that's what we're really excited about.
[00:26:08] Speaker A: How does that work logistically? Or even compare that this to any really nationwide property management company?
Do you have to have a real estate license in every state? Like, how does that work?
[00:26:21] Speaker B: Yeah, so it's complicated. Every state's got its own rules, as you know. So in some states are highly regulated. Like in our western states would be like Arizona, Nevada, Hawaii. And then, surprisingly, California's unregulated, the short term rental space. So every state's got its own thing we set up. It's very complicated. I put a lot of money in to get this going, but you have to set up brokerages in each one of these states that were wholly owned by us. And then we have principal brokers, or designated brokers in each state that work for us, and they become effectively like a market leader. So they're ultimately responsible for the compliance responsibilities for that particular market. And so very complicated, very hard to scale, which is why very few people have done it. We talked to Vicasa, they have done it, and there are a few others that have multiple states, so very hard startup for it, which is why there's not a lot of global players in this space. And so that's logistics. Number one, the kind of the whole corporate structure and the flow. And then number two, from the homeowner perspective, the mechanics go something like this. Look, you got a home in the Smoky Mountains, you want Luxus to manage it, you call us somehow, we solicit you, and we will try to earn your business. We give you, you know, what, we think the market comps are where it could be. We then audit your house, and we say, your house is great, we love your furniture. It's the right size. Three bedrooms, four bedrooms, great location.
We now need to add the Luxus brand standard, and for you, we need to add the linens and the towels and various things, and that's going to be $15,000. So the biggest barrier in this particular situation is Luke saying, you know what, I don't want to spend 15 grandd upfront for this in order to maybe do better than I'm doing now. Obviously, proof of performance. You could pull 100 people, and 99 out of 100 would say they would pay 5% more or a few percent more. Or if it was all things being equal, even equal to the market of the comp, they would stay with something certain versus something uncertain. So our thesis is that we're going to get higher occupancies and slightly higher ADR's than the neighboring property when people coming through Luxus know what they're going to get the other side. So we audit the home. Luke says, you know what, 15 grand is worth it. I got a million dollar home. It's only 15 grand. And then obviously we take over full management and we just send you checks every month and it runs through our platforms and we go rent it to our, you know, thousands of people that already follow us. And then obviously we still use the otas. So Luxas VP is the primary channel. And then excess inventory goes in Airbnb and DrBl. And then hopefully what happens? Someone comes through Airbnb stays at your home and they're like, holy shit. This is like an incredible. Sorry if I swear, I can't remember if you'll out swearing on the show.
[00:28:54] Speaker C: Just a little.
[00:28:55] Speaker B: Just a little swear word there is. They're like, this was incredible. And on the tv it shows the luxus portfolio around the world and that Joe Smith stayed here home, says, I want to stay here again, and I'm going to book another Luxus home. And they get into our direct booking platform versus relying on Airbnb so that we have the mechanics of onboarding home. We send a team down to set up your house. Everything's labeled, everything's dialed in, and it gets rolled into our portfolio, and then we're off to the races, renting your home.
[00:29:22] Speaker A: There you go.
15 grand is all. Is that going to go up, you think, or is that based on the size of the property or combination of.
[00:29:30] Speaker B: Size and what you have? Like, for example, if you got really amazing towels, you know, that are at or above the standard we already have. We don't have to put in the Luxus towels, but if you got pink towels and they're worn out, then we got to put on our, you know, our towels. So every audit's different. Like some guys, starting from true scratch. Like, I bought an empty house, a four bedroom house in Phoenix, and, you know, it's got furniture as nothing else. We have to provide every fork, wine glass, knife, tv. It could be 40 grand or 50 grand, but you'd have to buy that stuff anyway to set up the home to that standard. So now most homes already have forks and knives and all the basic things in place. So that's where that ten $15,000 number. And the bulk of that is linens. Linens we have. We're very passionate about. We've tested dozens of linen companies. We have one global partnership with one that's phenomenal. They last a long time. They handle the wear. They get amazing feedback consistently. And that's almost 50% to 70% of, usually the initial budget that just linens. But a great night's sleep can change someone's life and make them highly desirable to want to come back to your home time and time again. And then the rest of the things are just fillers to make sure that when someone goes and they want to have ten people over Thanksgiving dinner, they know there's a turkey baster, a roasting pan, 14 wine glasses. They have all the things that they know. They're not guessing when they get down there. So those are all the fillers that we would add in through the audit. And we have a central warehouse in Colorado. We just check all the things off the audit list. We press a button, two pallets show up to your house in the Smoky mountains. We send a team down, we set it up, get it dialed in, and then it's ready for the Luxus program.
[00:31:06] Speaker A: Let's just pretend that I'm a prospective client. How were you? How are you going to find the cleaners in each of these markets and source these? That's a big pain in the rear end.
[00:31:15] Speaker B: It is a big pain in the rear end. We've been dealing with for 20 years, almost. We're used to it of having this. We always get a really interview and find a kick ass person on the ground that becomes our boots on the ground. And that's our local property manager. So we have the head office, support and infrastructure for distribution and brand standard. But the local person is really the key component, and it's their responsibility to help find the handyman, the cleaners. And we work with them to ultimately make sure we got the right team on the ground to execute. And so cleaners, for example, is really hard. But we're a good, established company. We pay well, we pay on time, and as a result, we've got a track record of ensuring we can recruit and retain great talent on the ground. And so it's never been a problem for us. Not to say that it's easy, because it's not easy every day, but 20,000 vacations later in group number one, it's something we got a lot of confidence we can execute on.
[00:32:08] Speaker A: Yeah. You know, this is a question I get all the time and people come, come to me and they want to learn how to be, you know, property manager, etcetera. And, and they're nervous about hiring the cleaner. But it's, what I'm going to say sounds like exactly what you're saying is it's just all about practice. You know, hiring and firing is a skill.
[00:32:28] Speaker B: That's true.
[00:32:29] Speaker A: And if you've never done it before, it is extremely nerve wracking. And quite frankly, it never really gets easy. But you do get better at it. Right. Can you give me some reassuring information for people listening right now that it does get better when hiring cleaners?
[00:32:44] Speaker B: Yeah, absolutely. Absolutely. So we've, we've tried all sorts of things. Early stage, we would hire like a one person cleaner in Hawaii, for example, just got a hard market to find cleaners and they were really inexpensive. They were like $200 a clean. But, you know, and we thought it was great. They were really nice, they interviewed very well and they do a really good job. But what we found personally, these small companies, our flip days are tight. Checkout at eleven, check in at four. And so they're like, oh, I'm on holidays this week or I'm sick this day, and there's no backup and there's no person in there to kind of step in their shoes. So we've actually gone to bigger, more established cleaning companies that have the backup and resort. And we just pay more for that, frankly. But the guest experience is so critical. If at 11:00 a.m. a checkout happens and that place is not cleaned by at 04:00 p.m. you have a very disappointed client and a bad review coming up at 05:00 p.m. that same day. So what we've done is through the interview process, make sure, a, you know, they got a good track record, b, they have backup. Even if they're a small shop, that's okay. But it's like, well, I'm not doing it. I have these three other people can step in my shoes. So, and then from there, pay them well and pay them on time. Like that's what these guys are looking for. And it's a lot of times we pay in advance to some of our local vendors. There are really small shops and they love that no one does that. And so once you do that, there's plenty of amazing, talented cleaning companies and cleaners out there, but they're used to kind of being jerked around, frankly. So be, be the client for them, that pays them first, takes care of them, and you have a good system of expectations. So we have a cleaning standard checklist. It's exactly how we make the beds and the whole thing. And it's, at first they like it, they like it. Like they know exactly what your expectations are and they just execute to that checklist. You know, our deep cleaning standards, we have a whole checklist. Once a month they have to move the couches and move the paddle furniture and sweep over all the dust buddies out. They like that. You know, it's, it works out really well to give them some certainty in the process. And they're going to stick with you, you know, unless you start jerking them around, you know. And so we just take care of good people. Not every cleaner has been with us since day one. We've obviously had turnover. And you find new people, but there's lots of good people. They just want to be treated well. And I think a lot of people in the industry aren't, frankly. So just treat them well and they'll stick with you.
[00:34:53] Speaker A: Talk to me about Costa Rica. I think you do. You still right now, have a property or two in Costa Rica. What's that like? I'm fascinated with other countries, etcetera. And that's one that comes up pretty often.
[00:35:04] Speaker B: Yeah, I'm a big fan of Costa Rica, personally. I think it's still been my favorite vacation spot in the world because you get this really amazing, like, nurturing, high quality people, this latin american country, and you fly into. We always, folks, to the northwest of Costa Rica, we have four properties at our peak. Obviously, those are during our ownership phase. We now have three properties in our program. Two are for rented right now, another one coming online in a couple months, and for the rental side. And what I love about it is that the northwest part of Costa Rica in particular, you can fly into Liberia, which is a small, like, tourist airport, versus going through San Jose, which can be a little scary and frankly, maybe a frank, a little bit sketchy, too, to get to the southern part. It's. Weather's perfect, the ocean's unbelievable, and everything is so reasonably priced. So, like, our clients would go there, live like kings, because we could hire a chef three meals a day for like $500, and you got eight people in your house, you divide that out, that's cheaper than going to a restaurant. So that same person in Hawaii would cost $3,000 for a day of chefing or $2,000. You get to live like kings. And the people down there are just wonderful, super wonderful. And so as a result of that, if you like ocean sports and tropical climate. I just think in Latin America it's hard to be Costa Rica, northwest Costa Rica, but I'm sure the south is amazing as well. We haven't spent time down there. We're always in that northwest part. Very easy to get in and out of Liberia airport and it's phenomenal. It is a great rental market and it's got a good nine to ten month season. So for property managers, hyper seasonal destinations are hard to generate the revenue. But aside from September, October, in the bit of August, it's a pretty consistent booking system from November through till middle of August. And the flights and everything air left out of there is great. So I'm a big fan of Costa Rica. We want to probably get to 20 properties there.
[00:36:54] Speaker A: Okay, wonderful.
You like to travel is really where all this came from, right? And that's the name of the game. That's why we're here. We like to go places to see things.
[00:37:04] Speaker B: Exactly, exactly. We're passionate travelers. I'm with you, man, I love it.
[00:37:08] Speaker A: Very exciting. Okay, cool. Talk to me about, let's say I'm a prospective property manager like yourself. How are you acquiring new, new clients?
[00:37:17] Speaker B: Yeah, so right now it's because we had such a strong following being in the business for 1718 years. We had a lot of affluent clients in our first program. Most of our initial business is coming from our initial network and we're blessed that we've got 1000 people that have followed Luxus over the time and they're all high net worth families and they have homes, they want to acquire homes. So that's kind of our primary source of growth right now. That'll probably get us our 1st 40 to 50 homes. And that's hard for someone that maybe doesn't have that network. But we've been at it for almost two decades, so we're fortunate to have that kickoff from there. We're really going to be kind of two strategies, referral basis. So one homeowner tells another homeowner, be like, I'm doing great with these guys. These guys are phenomenal. And one thing carrot we have that others don't have. I didn't mention this, but it's important. We have a global exchange program. So a homeowner, whether they come through referral or in our group or however they're solicited, they come to us. Certainly we want to property manage and revenue manage their house and deliver the best return possible. And they can of course use their homes as much as they want. We also have this exchange program, so if you had a house in Maui and you want to exchange that home to go to Tuscany, we have a system in which you can exchange your homes within the people in our portfolio that have opted into that program, which almost everyone's opting in. So that's very unique. I mean, there are exchange programs like third home and such out there, but to our, to our knowledge, we're the only property management company that actually does home exchange. So we take care. So when you exchange your home from Maori for the Smoky Mountains, you know what you're going to get no matter what on either side. So it's a really nice carrot for property owners to basically, you know, convert them to the Luxus program. But to get them in the door, we use our network. And then the second thing we do is we have a referral program for realtors. Realtors are a massive conduit to short term people that are short term renting their homes. So we go to Realtors, we have a little referral program for them. They refer someone to us. We work hard to earn their business. If we do earn their business and they come in Lexus program, we pay a little upfront fee and then we pay a little percentage of rent of the first year to that realtor. And the realtor realtors, I mean, they want the money, but they want to make sure their clients are looked after. That's the number one piece. And we want to have a track record of showing that our clients are looked after. So when they refer someone, they just sold the house in whatever Santa Monica to, they feel confident they can refer them to Lexus, that that client is going to be well looked after from all facets. And so the Realtor network is going to be a very big channel for us on our growth aspirations over the coming years.
[00:39:49] Speaker A: All right, great, great. Well, wonderful. How do we find you?
[00:39:54] Speaker B: So www. Dot Luxus. So luxusvp vacationproperties.com. go check it out. And if you're a guest, you can click on sign up to the loyalty program. There's no cost, and we'll just keep you up to date as property launches. If you're a homeowner, same thing. There's a link on there and you got a home that you think it could be a fit for the Luxus portfolio, send us the information. Not every home is going to be a fit for us because we want to make sure we're a fit for you. But if you're curious about the homeowner aspect, we'd love to have a chance to look at your property and see if it's a fit and talk about a partnership. And on Instagram, Luxus VPN. So that would be the place to find us.
[00:40:32] Speaker A: All right, brother. Appreciate it. Thanks for coming on short term rental management. And don't be a stranger. Thank you so much. We'll see you soon.
[00:40:40] Speaker B: Look forward to working with you, Luke. Great times, man. Thank you. Later.
