Navigating Airbnb Challenges: Your Guide to Profitable Short-Term Rentals

John Harcar (00:01.582)
Hey guys, welcome back to our show today. I’m your host, John Harcar, and I’m here today with Mike Demson. And what we’re going to talk about today is his real estate journey in boutique hotels and short-term rentals. Hey guys, remember, at Investor Fuel, we help real estate investors, service providers, mean, really all real estate entrepreneurs, pretty much 2 5X their business by providing tools and resources that help them build the business they want and in turn, live the life they want to live. Mike, welcome to our show today.

Mike Demson (00:31.3)
Appreciate you having me. Thank you so much.

John Harcar (00:33.026)
Yeah, I’m excited to talk about your journey. You know, there’s a lot of buzz about boutique hotels and short term rentals and all that. before we really talk about that and get into the weeds of that stuff, why don’t you tell our audience a little bit about you, kind of your background, what got you into real estate, and what got you here?

Mike Demson (00:51.129)
You bet. So I was born and raised in California. I’ve been here for just about the majority of my life, really. I’m based in Marin, just north of the Bay Area and been so close to San Francisco. I spent the majority of my career in tech, working in marketing and did a ton with some pretty large clients. That includes Sephora, Adobe, and Airbnb. I was actually an early employee at Airbnb and

you know, that was kind of an introduction into the short-term rental space. but I was actually working for the platform as opposed to being an investor. I got to a point and, you know, wanted to switch sides. since then, you know, I’ve, I’ve, you know, found, opportunities and, know, I’ve really gravitated towards, ground up development and, looking for things that, you know, I’m able to add a significant amount of value to.

John Harcar (01:32.771)
Yeah.

Mike Demson (01:48.805)
regardless of the time horizon.

John Harcar (01:51.168)
Okay, so you started off in tech, right? Did you have any influences, anybody in your life that had any real estate involvement? Family, uncles, whoever?

Mike Demson (02:03.805)
I’ll be above. I kind of have, I would say, a unique journey, if you will. My grandpa actually came over to the US when he was 13 years old, worked on Hearst Castle. He was a mason. My dad worked with Clint Eastwood in building out his golf course and clubhouse in Carmel, Tahoma. So it’s been weekends, summers.

actually working on some pretty cool developments. I saw these incredible homes. It was very hard work and it was pretty good motivation to do well in school and get to a point where I’d have other opportunities available.

John Harcar (02:46.778)
So you guys started working off with your you know working with your hands early in life Was was that experience what kind of made you say? Okay, maybe like real estate, but I don’t like the hands-on stuff as much

Mike Demson (02:51.322)
Sit.

Mike Demson (02:58.902)
Well, I think it all depends on your perspective and what you’re looking to do. It’s helpful to have an understanding of different subs, different grades. I think that’s important. I actually partner with my father-in-law at Thompson Builders in Nevada. We’ve got several boutique hotels that are either currently stabilized or working on turning around, adding additions or looking to

convert commercial properties into a hotel. So there’s a few different ways that we approach it.

John Harcar (03:35.198)
Okay, yeah, we’ll talk about the boutique hotel stuff in a minute, but just you know as far as your Airbnb thing How did you fall into that?

Mike Demson (03:42.785)
Early employee. You know, I saw, you know, some of some of the successful operators and wanted to learn more. Started, you know, listening to podcasts, reading books, going down the YouTube university rabbit hole. And, you know, that that was a good introduction to what’s possible.

John Harcar (04:05.326)
So you’re seeing these guys with the Airbnbs and you said, hey, I need to be on that other side. What were some of the challenges for you to make that transition if there weren’t any?

Mike Demson (04:16.453)
So don’t really know what you don’t know. I found that, you know, there’s when you have multiple properties spread out over large areas, it’s difficult from an operations perspective, just because you have different providers, different costs, it’s difficult to, you know, manage those costs in a way that makes sense. And then one of the biggest constraints with short-term rentals is just how the things are valued.

It’s based on what the property down the street sold for around the corner as opposed to commercial property where you take an income approach and it’s just a completely different ballgame.

John Harcar (04:57.176)
Did you have, I mean, did you pursue any special, maybe training, a mentor, anything specific to help you learn those processes?

Mike Demson (05:06.876)
just surrounded myself with people that knew more than I did. That was kind of the first step. And for me, it was just asking the right questions and getting on the right groups.

John Harcar (05:18.168)
Okay, and then how long after you kind of made that transition did you buy your first short-term rental?

Mike Demson (05:25.064)
I’d say 60 days. You know, it was pretty quick. I wanted to find something that I could kind of roll up my sleeves and that made sense.

John Harcar (05:36.75)
Okay, very cool. So now you’re doing Airbnbs and I know you mentioned the boutique hotel stuff, you know, before we kind of dive into that, what do you think based on your experience, maybe folks that are getting into short-term rentals, Airbnbs and stuff, what kind of mistakes are they making when they kind of get off on that path?

Mike Demson (05:56.328)
The biggest mistakes I see is overpaying, trying to steal, spending too much. It’s not what want to do. You kind of make your money on the buy and you really have a finite amount of runway if you’re overpaying. So that’s, I’d say, first and foremost.

John Harcar (06:19.672)
And I know I’ve heard this from a couple other short-term people, like when you’re evaluating properties, do you look at it as just that exit or do you also say, you if it’s not a short-term rental, it’ll still also work as a long-term?

Mike Demson (06:31.849)
From an underwriting perspective, I’ve always got to underwrite as conservatively as possible. And if it doesn’t work long term, I wouldn’t consider it short term. We look for A-plus locations with good bones that we can add some value to.

John Harcar (06:51.626)
And are you buying turnkey? You mentioned value add. Are you buying turnkey? Are you looking for a certain level of rehab that you purchase?

Mike Demson (07:00.601)
Very deep value add. We prefer to think about, there a parcel next door? Is there a backyard? Is there additional space that could be built on that? I’d say one of the primary interests.

John Harcar (07:19.886)
And I like to ask this for short term Airbnb people. What’s one of your craziest stories you’ve had maybe from a guest or from, know, what’s one of the crazier things that’s happened at your Airbnb? Give me the, give me the low down.

Mike Demson (07:34.1)
There’s too many stories to list, I’d say. On the guest side, it’s difficult when a guest either doesn’t show up, they have issues with their payment, they bring too many guests, bring a pet when they’re not supposed to. There’s all kinds of issues that can come from that, I’d say. One of the most interesting is

It was actually a guess that completely had, I think, a meltdown, just completely trashed, uplaced. It’s just not one of those things that you want to deal with, but you got to. That’s the only way around it.

John Harcar (08:22.306)
Meltdown so so she just completely like just destroyed the inside. mean what give me a little bit more background on that

Mike Demson (08:29.917)
trash to pay place. was pretty bad.

John Harcar (08:34.892)
she give you a reason why?

Mike Demson (08:37.788)
No, we just sent it straight to claims and kind of there wasn’t much much to be done.

John Harcar (08:38.478)
Hahaha

Right on. Right on. do you see any, you know, I know there’s been a lot of, you know, regulations and, you know, some areas where maybe Airbnbs aren’t even allowed. Are you seeing any trends like that coming in the real, in the short term rental world at all?

Mike Demson (09:01.419)
Absolutely. San Francisco, one of the main markets, they’ve made some major shifts in how Airbnb’s are regulated. And that’s actually a big reason why we’re building a ground up 16 room boutique hotel in North Beach. Just because it’s already commercial property. We have the opportunity to be in a great location. It’s got views of the Golden Gate Bridge.

You know, just a few steps to the main cable car pickup right next to Pier 39 and it’s a really good location for a hotel and it doesn’t necessarily have the same competition from the short-term rentals. So that’s one of the main advantages, I’d say, of going to the commercial side.

John Harcar (09:52.822)
Okay. And is it just yourself on your team? I know you mentioned you work with another family member. Do you have like a team built out to help you acquire rehab, do all the stuff that you need to do on these terms?

Mike Demson (10:05.916)
You bet. Fairly built out team. got some opportunities to partner on larger projects and that’s a big part of working with family.

John Harcar (10:20.844)
Yeah, of course. How is it where, mean, how do you like working with family? I know I’ve talked to lot of folks that have family and been like, hey, now I’ll never do that again. Have there been any instances to where, you know, it’s caused a rift within the family of the dynamics?

Mike Demson (10:37.846)
the end of the day, you’ve got to show up with patience and persistence. think communication is a big part of that, understanding that everyone’s got a million things that they’re working on and being humble, coming with some grace and just asking the right questions, I think, is that that’s helpful.

John Harcar (10:57.87)
OK, so after you started these Airbnbs, what prompted you to make a change to go into boutique hotels?

Mike Demson (11:07.85)
the shift in regulations. San Francisco, they basically did the exact same thing that New York did, more or less outlawed the unregulated or unlicensed short-term rentals. They put legislation in place that you actually have to be there in your own short-term rental, which is very difficult for most operators. And it was just tightening regulations.

John Harcar (11:38.254)
Okay, now when you’re, are you buying already done little boutique hotels? know you’re building ground up, but when you first started, were you buying something that was already developed?

Mike Demson (11:49.677)
Exactly. Yeah, started with it was actually the Stone House in Sonoma. Beautiful historic buildings didn’t used to be a hotel, but we actually converted it to a 16 year in boutique hotel. And at this point, it’s stabilized, undrowning and throwing off a reasonable amount of cash flow. And the real opportunity there was, it actually came with an adjoining parcel that we’re working on getting entitlements for building.

an additional 67 rooms. At the of the day, it’s going to be a flagged IHG hotel. yeah, cool opportunity for sure.

John Harcar (12:20.43)
awesome.

John Harcar (12:25.831)
okay, okay.

Sounds like it. What challenges did you face or things, obstacles when you went, made that change from, you know, the short-term rental to a Batuco hotel? Like what things came up that were a lot different than what you were previously doing?

Mike Demson (12:42.861)
So it’s a different kind of lending. working with different banks, different financial partners, you’ve got to understand that you have to bring a little bit more money to the table. And that’s just a part of how you underwrite. That’s the biggest change. On the residential side, you can take advantage of some FHA or some.

favorable lending that you don’t necessarily get on the commercial side.

John Harcar (13:14.35)
Okay, so you’re using private money or hard money to do these.

Mike Demson (13:19.627)
But we have in the past, we don’t as much right now. I’d say it’s a little more expensive than working with the bank. we recognize that there’s a place for everything, place and time for sure.

John Harcar (13:32.45)
Got it. And how many short term and boutique hotels do you have at the moment?

Mike Demson (13:39.207)
on the residential side six, three currently on the boutique hotels.

John Harcar (13:46.414)
Okay. What kind of things, you I know there’s folks that maybe are out there listening to this and might’ve thought about, you I want to do short term or maybe even thought about boutique hotels. I mean, what kind of, you know, resources are out there for folks to be able to learn this outside of, you know, going into a class or a mentorship or something like that?

Mike Demson (14:06.897)
Classroom mentorship is a great place to start. know, surround yourself with people who’ve done it before and who are sort of already at the point that you want to get to. I think there’s a ton of value in cutting down the learning time.

John Harcar (14:22.979)
Is there any specific advice that you might want to give to someone that’s just either getting into short-term boutique or any real estate investing as a whole?

Mike Demson (14:33.367)
Yeah, find a partner, someone that has a little bit more experience than you do that knows things that you don’t know. I think understanding your own weaknesses, limitations, that’s a key and something that I found to be pretty helpful.

John Harcar (14:52.876)
OK. And then what resources do you think people can go out and find that can help them with some of those things?

Mike Demson (15:01.581)
of YouTube. You can find out just about anything. Spend a little bit of time on the Investor Fuel page. Yeah, that’s definitely worth checking out.

John Harcar (15:02.926)
YouTube you.

John Harcar (15:09.902)
Mmm.

John Harcar (15:13.686)
Yep, there’s a great ton of information. Well, what other facts or things you want to tell our folks about Bucsicotel and kind of how your business is maybe put together and ran?

Mike Demson (15:24.953)
But I’d say, you know, reach out. I’m active on LinkedIn, Instagram. Happy to chat. You know, there’s kind of open door policy. Let me know how it can help. I’m happy to either point someone in the right direction or, you know, help out where I can.

John Harcar (15:44.334)
Cool. And is there a specific website that they can go to to reach you? Is there a specific email or anything that you might have for them to reach out?

Mike Demson (15:54.659)
You bet website is dimsum consultant.com happy to have a conversation. Yeah, emails listed there.

John Harcar (16:01.524)
We didn’t even talk about your consulting business. Tell us a little bit about that.

Mike Demson (16:06.316)
You bet. So that’s kind of building off the experience in marketing. You know, I’d say working with technology clients has been a big part of my career and that part of the journey. And that’s really allowed me to do some of the other things. So, yeah, happy to share more. We had the opportunity to work with some pretty good clients over the years. One of the other interesting ones is actually Prologis.

They do light industrial and actually are partnered with Amazon. So yeah, there’s some cool opportunities out there for sure.

John Harcar (16:47.106)
And then what specific help do you give to businesses in your consulting? Do you help them with their online presence? Do you help them in, how do you help them grow? What do you do for those companies that reach out?

Mike Demson (17:00.291)
You bet. It’s full service consulting. You know, it really depends on, you know, what’s needed. can be SEO content, video, emails, paid marketing, Facebook ads and Instagram. And yeah, there’s really no channel that we don’t work with. So it’s pretty much anything digital.

John Harcar (17:24.672)
Is there a specific industry or avatar that you more focus on or that just anybody and everybody who wants to do e-commerce?

Mike Demson (17:33.072)
I’d say it’s anyone, you know, in the e-commerce technology and real estate space as well.

John Harcar (17:39.374)
Okay, very cool. So where do you see your business going in the next couple of years?

Mike Demson (17:45.401)
Continue growing for me. I think the boutique hotels are the best opportunity, at least in my opinion. It’s an area that we will want to continue focusing on and growing and we also do multifamily, light industrial and some of the other asset classes as well.

John Harcar (18:08.428)
Okay, awesome. Are there any specific challenges that you may be running across in your business to reach that growth or reach that next level in your journey?

Mike Demson (18:17.104)
It’s always finding the next deal. We work with some brokers. We also will do some direct seller outreach. We’ll leave her in. If there’s an opportunity to get property at a faster sell price, whether that’s through tax sales, auctions, bankruptcies, foreclosures, it doesn’t really matter.

John Harcar (18:46.318)
OK. Looks like we froze up for quick second. I don’t know if that’s on my end or yours.

John Harcar (18:56.718)
Well guys, I hope you guys enjoyed the podcast and if there’s anything you guys want to talk to Mike about, please reach out to him. OK, Mike, are you there? We had a quick little break.

Mike Demson (19:09.828)
Yeah. Yep. No problem.

John Harcar (19:12.398)
Quick little freeze for some reason if I was on my end of yours, but okay cool So what we’ll do is we’ll take I know you sent me all your contact information We’ll put that down in the show notes I appreciate you coming on and sharing all that guys if you have any questions Maybe have any interest in you know short-term rentals boutique hotels or you just want to you know Ask Mike some questions on his journey, right? We’ll put all that stuff in the show notes Thank you again for coming on and I hope everybody here enjoyed the show I know I did and we look forward to see you on the next one

Cheers.

Mike Demson (19:45.392)
Thanks for the time.

John Harcar (19:46.862)
Okay, what what what what