AJ Johnson on moving from long-term rentals to an Asheville Airbnb

0:00 in this video I sit down with AJ Johnson who's a member of my private community and he started his real estate Journey the way that most of us do long-ter rentals well like many of us AJ eventually ran into the biggest Nightmare and that's tenis refusing to pay mortgage payments were piling up property managers didn't care and AJ was left footing the bill it nearly drove him away from Real Estate completely until he made a switch AJ moved to airbnbs their shorter stays more control and way fewer headaches it was a perfect match AJ's Airbnb has brought in consistent profit up to $8,000 per month in some cases now these Deep dive interviews used to be exclusive to my paid membership but the strategies are just too valuable to keep price so I'm releasing them weekly on this channel feel free to check out the previous ones right here as well if you don't know who I am my name is Preston I built a $15 million real estate portfolio and make $400,000 per year in net profit for my airbm in this interview we're going to cover the biggest mistake that most people make with management companies and how you can avoid it the X actor that makes A's Airbnb stand out from the competition and how to manage an Airbnb the right way even if you're juggling a full-time job we go into a whole lot more as well so let's dive in all right we got Aj Johnson uh thank you for hopping on I know you're traveling but uh thanks for making the time here so wanted to have a conversation with you AJ just cuz I know you you've been uh crushing with your your airb portfolio so a couple things you know there's a couple strategies within the airb game that I want to kind of get into you know most people they start with Arbitrage but I know you just you know jumped in purchasing properties so before we get to all that if you want to just give you know us a background of who you are um you know maybe what you did before this

1:18 and then you know what you're up to now yeah yeah so um Aj Johnson um and I have been in the real EST estate game for probably about the past 10 years off and on right off and on I started out with renting a house that I was living in but I had to move quickly uh so I ended up ringing it out and that was my first entry into real estate I eventually sold that house and got out of the real estate game for a little bit but then I returned more recently and kind of just went full sned on uh an Airbnb and short terms uh my background is in cyber right I've been working in the Cyber field for the past uh about 14 years in which is is cool but you know you're not really working for yourself unless you own your own company so I kind of wanted to expand my my Investment Portfolio uh and also take back some of the control of my uh my my Financial Freedom so I I know you mentioned you've been in real estate for the last 10 years when you first started what are some of the business models that you you know you were working on uh and then you know what what made you like sh want to shift gears to or the shortterm rental game yeah so when I first started it was uh it was out of necessity um I was pursuing a a career and I got a call

2:37 where they said hey look we need for you to if you want this job we need you to move even within the next 30 days and I said okay uh I'll I'll make it happen and so that myth that the house that I had just bought I needed to either sell or rent and trying to be um smart with my money I was like let me just go ahead and try my best to get this thing rened out so I did did exactly that and in terms of trying to do things quickly I went and found a management company that was local he told him hey I need to I need to rent out this property uh can you guys handle this for me and uh they were of course very much so interested in taking on my my account so I went with the uh the management company and then I popped smoke and uh traveled for work and that actually was not the greatest situation right um it's different when you have somebody else carrying or taking care of your property uh and you don't bet them I think it's really important to be very mindful if you're going to get into bed with a management company understand that they have probably dozens of other accounts and they're probably not going to look after your property in the way that you want it looked after and they will find a tenant like whoever that is a tenant to to to be in there uh so we had a

3:57 couple of issues over the years and I ended up separating from them and when the market was right uh I ended up selling the property because they had gotten a tenant in there who had just decided he was going to stop paying like he's just like yeah I know the monthly rent is due but I'm not paying and basically based off of where the house was there wasn't really many options for me to to pursue uh in terms of getting him to pay and getting him out of the house so it was just best for me to just offload that property and I took a little break from Real Estate after that because it was just it was a lot yeah I mean I can imagine right and that's every person like that wants to get into real estate's biggest nightmare right you know having a tenant having this house this mortgage that you're on the hook for but you're not getting the rent in um so you know I compl understand why you you know kind of shifted away from Real Estate for a little bit so what kind of made you want to make the shift into short-term rentals here now a few years later so short-term rentals in the short-term rental space the short turnaround of your your investment right so the the short time frame that you're working with having a tenant in the actual property is what drew me to it right because now I'm not worried about signing a 2-year lease

5:15 where if they sto paying after a year and a half now I have to go and figure things out I have to go to court I have to get lawyers I have to do all this extra stuff it's shortterm so now I'm only worried about like hey they're only going to be in there for 7 Days right most of the times be less than that and that allows for me to have a lot more handson with the property and have a better understanding of hey where is the property at in terms of uh maintenance right is there anything that's broken is there anything that needs to be tended to is the property actually being taken care of and when you have that uh when you have short terms in place it allows for you to have a lot more touch points with the property where now you're understanding property is taken care of and it's also now it's getting cleaned to two three times a week and it's being wellmaintained so your investment is actually appreciated whereas sometimes with long terms your your investment can go down it can tank basically because you have a bad tenant in there that you didn't think was a bad ten you were just like hey we signed lease they they checked all the boxes to the background check and now you know somehow I have I have a a hole in my floor or you know or something else that uh is going to cost you an amount of money for you recoup your investment so the the short-term

6:35 aspect of a the the quick turnaround of tenants right the quick turnaround of guests the multiple touch points where you have cleaners coming in and out and taking care of the property and and taking notice of things that are that are wrong or things that might might need to be uh fixed and then also the quick turn around on your your money right like that guest gets in there and then they get out and you get your money it's not necessarily like you have to wait every month on the month and then you get paid hopefully if they pay once they're in and once they get out you have your money so let's shift gears a little bit and let's talk about how did you identify that First Market you know kind of walk me through your market research process on how you were able to land on the that first market for your Airbnb yeah so I probably did it the wrong way so let's back up I got into this game with shortterm ter because I had stayed at a lot of airbnbs already I like the concept of airbnbs I like the concept of short terms because I just felt like when you have an Airbnb versus a hotel room I'm choosing Airbnb like almost every time unless my options are slim to none so when I saw the business model of Airbnb I was really attractive from a consumer perspective but being a

7:55 part of that business model uh drew me in even more so when we would travel and go around to all these airbnbs I would get ideas right how how's my experience like this Airbnb had this really cool amenity that's new and I I think probably a lot of people could ATT test that over the years we've seen airbnbs really start to pull out a lot more amenities and a lot more experiences and they're really leveling up their game and when I saw how you have airbnbs that are competing with you know five-star hotels in terms of the amenities that they offer it kind of really opened up my my eyes to going into going into this space so through our travel it really kind of drove me to keep an eye on things and next thing you know I wound up in Asheville right it was a place that I just wanted to go to but when I was there I realized that this location has everything that you would really want for a short term it has local attractions it has uh local things to do right so there's things that you can go see locally and there's things that you can go do locally from whitewater rafting to hiking to biking to just sightseeing there's a lot that you can do and then there's a a huge tourist

9:14 element for the the local towns and suburbs around all of that area so for me it kind of checked the multiple boxes because it had the local places that you could go and see things local experiences and then there was an entire Economy based around the tourists the tourism economy so that's what made me think you know what the ash region this whole Blue Ridge area is not only beautiful but it's also a really good market for tapping into the short-term Market however however it is what some people would call a little saturated so there was a little bit of hesitancy in terms of do we jump into a market that's really saturated uh and if we do how do we distinguish ourselves and make ourselves different than the rest yeah that's a lot of you know a lot of good points that you're making and especially when you go into a more competitive market what are some of the things that you looked out for when you chose the particular property that you guys bought so I searched for about six to seven months for this property and what I was looking for was a bit of The X Factor right and when I say The X Factor I mean

10:33 something that makes a property unique unique to the level where you won't go to another property and see something like it right or there are very few in uh few properties far in between that you'll actually be able to see anything similar right so the X Factor that I was looking for was the ability to have views as part of the property like literally you walk out the the front door or the back door or one of the doors and there's some sort of Mountain View because that's why a lot of people come to this area if they're coming to the area to see the mountains then give them that one of the things that I always think about when I'm doing business is whenever you're dealing with a customer meet them where they want to be don't meet them where they are right so when I say meet them where they want to be if they're coming to an area for an attraction and it's something that you can you can figure out like views of mountains if you can incorporate that into your Airbnb and it doesn't necessarily have to be like it's an actual view of a mountain it can be a mural it can be something that's unique to to your place and you can incorporate that into your arbnb that's going to be a distinguishing Factor so when why when we were looking I was looking for views

11:50 and I was looking for honestly I was looking for is this as close to TurnKey as possible right so I can start to get this thing WR out out as soon as possible and then the third thing I was looking for was space it's hard to do a lot with a little right with you have a small footprint and you got a really small yard I'm not knocking at all like you there's people that have done phenomenal things with these small spaces but if you have more space you can do more things with that space so another piece to or another requirement that I was looking for was I wanted space I wanted there to be like at least some sort of backyard front yard something that would allow for us to uh for people to go outside because at the end of the day if you're coming to if they're coming to this area which is an area that is very outdoor focused outdoor Recreations they're not coming to the area to stay inside of a house right A lot of times they're coming to the area and they're going outside to experience being in nature so if I can give them that experience so that they're so they don't have to leave to go find it somewhere else that means that now I have provided an amenity in of itself that is going to allow people to want to rip my place over somebody

13:09 else's that's just four walls 100% and maybe you know you can pull up your listing here uh if you want to share your screen and as you're you're talk pulling that up I I know you mentioned a couple of really interesting things and especially when you're purchasing short-term rental you have to look for these differentiating factors not only in terms of amenities but but with the actual property itself so it's very hard to replicate a really nice view um it's really hard to replicate having like you know that experience that you're mentioning because I think a lot of people just kind of focus too much on uh oh I'm just going to buy this house because it's cheap um and I think I can make the numbers work but if you don't have uh you know these different modes that you can you know just you know build yourself into like it's going to be much harder for the competition to come out and you know replicate that so especially when you're purchasing a property number one and number two when you are going into more you know saturated Market as you would say 100% you actually made brought up a really good point about replicating right if you can so there's always so much earth right and if you can snatch up a piece of it and make it unique then you're providing an experience and I wanted to kind of touch on this whole experience piece because at the end of the day I think and look this is just AJ's you know thoughts but my thought is is

14:29 Airbnb is a business that in the business of not housing or lodging they're in the experience business right because someone will pay far more for an experience than they will for just a place to sleep right it's why people go and travel and go places right they want to have an experience because experiences are Unforgettable right it's the only thing that you can take with you so when you create these bases you create an Airbnb think about how you can make it an experience because that's what people are going to pay for and when they when they look at your your daily rate and they're like that's high what are they going to rationalize their thought process is going to be like well is it worth it and the question that that you need to think is how can I provide them something that they will will make them think it's worth it right is it views is it really cool amenities is it something unique that they won't be able to find anywhere else the worlds are oyster like you can do you can do anything get creative but as long as you can provide them something so that when they're trying to decide that that nightly rate is that worth it and they come back with the yes cuz I'll never have anything like this again or look at those views or look at that really cool game that they have that answers the

15:46 question so talk to me about uh you your budget for you know Furnishing the place the designs amenities what what were we looking at for that you know Preston uh there there was a budget and then then there and then there wasn't a budget uh there's I mean take it for what it's worth it it was one of those things where I had a moment where I said here's my set budget for this right and I think the the budget for design was 50 Grand and the the budget for the budget for renovations was somewhere around 50 Grand and then the amenities budget I think I had allocated about 20 for the amidi budget this is before we started working and getting things going um after that the budget blew up and it blew up because we saw the potential of the property and we came to a point where it's like do we blow up the budget and just say full sin and get to the finish line of exactly where we need to go because we knew these amenities need to be of this quality of this caliber and in order to drive that

17:05 ADR up we have to have these things cuz you look around and you look at the competition and you're saying okay my competition over here has a a nice Sixers hot tub my competition over here has a full game room my competition over here has a little gym right or my competition over here has a full pickle ball court how am I going to compete and ask for a higher ADR or or a higher nightly rate than them if I don't have comparable amenities or something that's different that's going to drive people here so initially that was the budget and we stayed on par with the budget for the design element parley uh we worked with uh we worked with Summer who I think you worked with in the past as well we work with summerl to to do the design um which was which was crucial right because I I I think of myself as a hammer right and sometimes you need a scalpel and so they were able to put like uh specific touches and specific elements into the space um but it it wasn't necessarily something that I would have done flawlessly on my own I also worked with another designer named Libby supic she's on IG you can find her she was also instrumental at designing the gym uh which is now I think probably

18:24 one of the better parts of the property so the design piece we stayed inside the budget Renovations we that that budget got blown completely away lesson learned like and and anybody who's who's listening or watching this when you're doing these Renovations find contractors that you trust and that are competent because if you don't you will pay twice it it's it's a fact you you'll either pay twice uh back to back or you're going to pay probably quadruple because now it's going on longer and it wasn't done right and now you have to either cancel a couple reservations cuz now you have to go back and fix something that wasn't done properly so the renovation budget that that completely blew up and then the amenities budget like I said that that also blew up as well and we ended up spinning probably I want to say the amenity's budget definitely blew up to probably at a uh no it was 20 from that probably double and then the renovations budget out out in I lost track so it was just a moment where we had to make a choice of is this investment worth it yeah a couple interesting things you mentioned and like you know lessons obviously for the people that are watching this as well uh you know one thing is especially since you're buying this property and this is

19:41 a going to be a long-term game you you kind of I'm sure you were like okay we're going to put all this stuff in you saw the competition if we don't get to that level then you know maybe this property is going to just start underperforming which you weren't going to accept and so you just you know spend the extra money and I'm sure you know with the way your listing looks and everything that's set up you're going to get paid that that money back eventually it's just a matter of like I'm just going to wait you know I'm going to play a long-term game it's going to be maybe back in a few years but you know I I can you know wait to do that um so I think that that's really smart another aspect of this I'm sure is you said you're workout junkie I'm sure you designed this place for the opportunity for you to stay in it as well and that's like the that that's the beauty of the short tental is you can have all these properties across the world um even the country and be like I'm going to go stay my place because I can because I you know so I'm sure that was another deciding factor but correct me if I'm wrong Preston you're spot on you you're spot on I think for myself and my better half when we were building this when we were making this property we really put our heart and soul into this and in a way that it was like hey what do we like right cuz we've we've traveled and we traveled intentionally to some really nice places literally to like to not steal their ideas but to get inspiration

21:00 right and when we were getting this inspiration we were like these amenities gym hot to SAA uh and now coming here in the next 30 days full pickle ball court these amenities are these ones that we would like to have right and if so why right and the why really boiled down to making memories and like I I want everybody watching this to take this with them make memories and you will make money period if it's an experience that you're providing that experience will make memories when people think and they go to book and they look at this they or look at your listening they think to themselves oh it will be really cool for us us or whoever they're traveling with to sit there and catch that sunset or for us to play that game they put they Envision themselves there and whether are they envisioning they're envisioning themselves they doing what making memories right so when you make these memories think of it it literally can translate make memories make money and at the end of the day for us it wasn't really about making the money don't get me wrong like the money is great but we really get a lot of value out of when guests come and they write to us and they say this place is amazing I'm so glad I booked it and you know

22:19 also we haven't had one guest say that we're not coming back every guest has said we're coming back we'll we'll let you know we'll book we'll book direct and perfect great let's let's do it but at the end of the day that recidivism lets you know that people are enjoying making memories at your place so make your goal to make memories so you know moving forward I know you know you had a bit of a hiccup with the property management company you're working with and uh you know maybe you can kind of go into that you know briefly and then we'll kind talk about you know what you're projecting profit wise uh for this property moving forward absolutely and I think we're going to hit hit a couple things on this one to be honest so when I when I built this property it was back breaking work I'm not going to lie to you I know there's a lot of people out here a lot of these Airbnb gurus and this is why I like working with you Preston because in my opinion you keep it real there's a lot of Airbnb gurus who said get out there and they say oh you know buy the property and then you know have you know furnish it you and you know you'll be hands off and you'll be making money in no time I beg the differ you know I'm like you I think there is a stry where you can do that with very small footprint airbnbs that that you maybe you can do an Arbitrage with the definitely

23:35 Arbitrage where you can have a very small footprint and you can get those up and running but the way that I did it and I willingly knew I was going to be investing a lot of my time and energy and money into it it was back breaking labor for probably about 3 months during that time of those 3 months it was an imperative that I got as much done as possible but once those 3 months were up I was like I had have to go back to work it wasn't like I was taking off from work I was working the entire time and at the end of the day you're pulling from a limited resource and I knew I was like I need to get back to my grind on work so I literally had to leave the property and went to work and then once I left the property I said I I don't have the time right now or at least I thought I said I thought that I don't have the time to manage this property I got it to this point I I've cut down all the trees I put up all the drywall I put in all these amenities we're good now I'm going to bring in somebody else to take on the whole management piece that was a mistake that was a mistake and let my mistake be your Learning lesson it is not as difficult as a management company is going to make you think it is you can 100% do the management yourself especially if you have one or two or

24:54 even three bookings you can totally manage it yourself and you can do so with the VA easily easily a management company is going to make you think that they're going to provide you with all these different things and it's going to be a special uh engagement and they're going to take really great care of your property and some of them might some of them might right the one that I dealt with that was not the case at all and they were touted as one of the top uh you know short-term rental companies in in the country that wasn't the case there were a lot of things a lot of flaws that I noticed throughout the entire time that I worked with them and I realized nobody's going to manage this property the way that I want it to be managed right nobody's going to take care of this property the way that I want it to be taken care of now does that mean that I'm down there cleaning it all the time no what that means is I needed to go through the process of managing it myself so that I can show someone else how to manage it which meant fumbling through dealing with a management company who you know uh may not have been as transparent with me about things and things breaking and and things not uh working properly I had to come down

26:11 to my house to find out the air conditioning wasn't working light bulbs were out like all these things and I'm sitting here touting the property as a place of excellence and it's not being manage like a place of Excellence so I guess the big takeaway is manage your manage it yourself learn learn how to manage that property yourself and then train someone either a VA or somebody local right I was lucky enough to find someone local that I trusted and now I have them in place and they're taking care of almost everything right to the point where now it's like it's kind of like a VA but they're just the person there they go back they check they do audits on the cleaning team they make sure everything's huming they make sure nothing's broken they get things in in tip top shape for guests they write nice little notes those small little fine details that provide people with a Kickstart to their experience actually goes very far in terms of the guest experience and how they feel about being at your place so they handle all of that so my mistake and and your lesson manage it yourself before you go on board a management company and the other thing is please read that contract if you do on board a management company read that contract because in my situation it was

27:30 almost like I was trapped and I couldn't get out of this management situation clean so I currently still have bookings from this management company which of course love to honor those because we want the guests to have a great experience but when you're paying 25% to somebody else just cuz they found your booking Le a bit of a salty taste in your M so just be mindful you can do it yourself 100% really good lessons in there so moving forward you know now that you've kind of wiped your hand cleans of this property management company you know what are you expecting to profit uh you know on average per month for for your property here so previously the property management company was the gatekeeper right all the money flow to them and then they gave me a payout and I really noticed that there was a lot of nickel and diamond on my on my statement when I got my statement I said oh we made you know we made uh what was it we made 3700 for like the month of March I was like that's great 3700 and then I saw it was uh $1,400 in expenses that just kind of materialized and I was like what are these expenses and there was a lot of question marks so beforehand it was on the low end probably about we started off at about 400 for the first month which is the

28:49 first month let just fine then it grew to 1,400 and then I was like this is not going to work with all this nickeling diving so I got rid of that property management company and now we are on track to do about 3 to 5,000 per month in profit the numbers and having control of your books and having control of the money coming in really provides a lot of value the metrics for me are a little bit skewed because I have I'm ottering a lot of the bookings that happened with the the previous management company but going forward months that there are no bookings by the previous management company we're screaming in terms of profit because the previous management company also mismanaged the pricing so that's another thing I wanted to really quickly touch on pricing please please price things yourself and don't don't just go into price labs and just like set it and forget it pricing is pricing is a moving a moving thing it's a living moving breathing feature that you you really need to pay close attention to and understand that just because you have three bedrooms and the hot tub doesn't mean that you should be priced

30:05 at the same as another place that has three bedrooms of the hot tub really analyze your property versus someone else's property because if your property has three bedrooms and a hot tub and somebody else is three bedrooms in a hot tub but you have Mountain views and a sweeping 120° panoramic view and you've got a couple other amenities inside a fully stocked kitchen that's not Apples to Apples right you need to come up on your price and it should reflect this so so another reason why my my income early on was low was because we were priced super low like we were priced almost embarrassingly low which was one of those things that made me call out the management company like hey what is happening with pricing they're like oh we're increasing it 5 to 10% every every week and I was like 5 to 10% every week we won't get there that in three years like this this needs to go up so take control if you want your property and you know your property can perform take control of it and do it yourself so at the end of the day for the months going forward we are on track to make a significant amount of profit where beforehand I told you 400 bucks one one month 1,500 bucks the next month I think for the coming month of June which we're

31:26 already solidly booked out for I think we're looking at somewhere around 8 8,000 in profit so it's pretty good I'm pretty pretty pleased with where the numbers are going uh especially once we get completely clear of this the management bookings which were significantly lower than where they should have been once we get completely clear that we're looking to to really make some gains in terms of the uh in terms of the debt that was acred building this place yeah now you don't have to pay 25% to someone that's completely trashing your investment you get to keep more of the upside and you get to make more money uh you know the way that you're currently managing at pricing operation side and so really good lessons uh to take away you know let AJ's he made the expensive mistake so you don't have to um so you know really good stuff man but you know just to wrap things up here uh what would you say to someone starting this business like some words of advice uh clearly you know there's a bunch of great lessons you kind of list it out but what would you say to that person looking to start their own entrepreneur Journey it's a great pleasure yeah 100% it trust yourself trust yourself and listen to your gut right the your gut is right most of the times so when I say trust yourself if you have that idea and you have that Vision go for it go for it cuz at the end of the day there's only one

32:45 person that can execute that the way that you want it to be done and that's you so pursue it don't think that you need to stay inside of this box where it's like oh well that person didn't do this and that person then do this and that person then do this yes no no they didn't because that vision is your vision so make that Vision happen bring it to life that's thing number one like we wouldn't have one of the we wouldn't have one of the highest elevated pickle ball courts on the Eastern Seaboard if I hadn't been like clear this land and let's put a pickle ball court there and it before was just Woods right now we have a pickle ball court at 3,300 ft trust yourself the second thing is you can do it but it takes action right you have to take action don't don't be that person that's like oh I'm going to do it don't be that don't be that person just do it take steps you're going to make mistakes look at me I have made a bunch of mistakes but I'm still here and we're still moving forward fail forward and the other thing is fail often fail fast learn from it rinse and repeat right you're not going to win throughout this entire thing this is it's always going to be a game of learning lessons sometimes sometimes they're painful sometimes they're costly sometimes they're they're cheap lessons but

34:01 they're all lessons that you're going to learn and put on your tool belt for the next one right so at this point we have three properties and I'm looking to expand in Wyoming and everything that I'm learning right now I'm going to take and push out there so just take action whatever it is just take action awesome AJ it's been a pleasure my man good chatting uh you know glad to see all the success You' had even with all the hiccups uh but that's what the true entrepreneur journey is about right you're not always going to succeed there's always going to be the losses but it's just a matter of how you overcome those uh to eventually where you're going to get to but um it's been a pleasure man thanks for chatting thanks for dropping all the bombs we'll talk to you soon man thanks Forest