How to Build Wealth With Mid-Term and Vacation Rentals

Bill Murphy (00:00)

Can you out give your competition? Can you outgive to people without expectations? If you’re a giver and you’re always looking to help somebody else where they are and not trying to either take advantage or get one up.

And you do that, you do things where you’re giving of yourself, it’s gonna come back to you tenfold. And you know, what one of the things that that that we did with when we got in the mortgage business is you know, I had a mentor of mine telling me that I needed to start giving because I had a little success. And I was like, I don’t owe the world anything, I just work hard for my for my success. And the second I started giving, we partnered with Make-A-Wish 20 years ago, and we’d be giving every single month to Make-A-Wish.

Joseph Crooms (02:10)

Hey everyone this is Investor Fuel Real Estate Pros podcast. And today I’m on the road I’m on the show with

Bill Murphy. Bill is doing some unique things. He is pretty much into the investment in, but he’s talking about some unique things that he’s gonna share with us. But there is a question that I have to ask Bill. So but before we do, Bill, glad to have you here. Say hello to everybody.

Bill Murphy (02:35)

Hey hey hello everybody, happy to be here, thank you.

Joseph Crooms (02:38)

I think our listeners are really going to take something away from how you approach business. But Bill, here’s my question. Explain the 1031.

Bill Murphy (02:46)

Well, I’m not, you know, I’m supposed to my disclaimer is I’m not an accountant or a certified tax planner, so not gonna give tax advice. However, a 1031 exchange is when you have a property that you sell and you identify a new property within 45 days. You have to close on that new property within 180 days. And you have to it has to be a move up. So you have to take out

equal to more debt than you already have in the exchange and the property needs to be at equal or higher value in the exchange. It’s my understanding.

Joseph Crooms (03:24)

Okay, we’ll tap into that s a little bit. I just want to know for myself. Hey, what is a 1031? So now I got an idea. So first of all, for people who may not be familiar with your world, give us the short version or give us the version what your main focus is are these days and what markets are you operating in.

Bill Murphy (03:41)

Yeah, so my my business, my my my business is my mortgage origination. So I lend money, right? But that’s opened up the opportunity over the years. I’ve been in the business for 28 years. I have a team and we’ve scaled the team that so that the business really does a nice job running itself with our database, our referral partners, our Realtors. But what what what’s happened along the way is we’ve had a lot of opportunities to build real estate portfolio. And that goes back to you know, when the financial markets crashed.

you had short short sales and foreclosures. You know, we built some portfolio there in some commercial in the commercial area. but my main focus in the real estate investment community right now is I think I found a niche. And this niche is we do mid to long-term rentals. So we we we it’s in the state of Rhode Island, it’s in Narragansett Narragansett, Rhode Island, it’s a beach community, right?

But it’s New England weather, so you don’t always have the beach to go to in in the dead of winter, right? But what you have is from September to middle of May, you have students who go to University of Rhode Island, URI, right? There’s 35,000 students that don’t want to be on campus that are three miles away from the beach that they can they can rent a home at. So it’s an academic rental. So that’s the midterm rental leases that we

create. So we rent to the students during the academic season. We get a year-long lease. And then you have cleanup time from middle of May to say middle of June, end of June, where you get 30 days to reset the property. And now it’s vacation season coming up. It mid to end of June through all the way up until Labor Day when the kids come back to school. And that’s Airbnb. So I have a property management company that helps me with that.

manage that manage those manage those properties but it’s been a great niche and that community has actually I I think it’s in the top 10 or 20 of of appreciation values in the last five years. so when we you know I got into it about 12 years ago in that in that community and been blessed and lucky to have my real estate values skyrocket, build wealth that way and have, you know, the short and midterm rentals

create a profit.

Joseph Crooms (06:51)

Let’s stay on the short rentals. How when did this idea or this vision when you looked at it when did that that shape in your mind?

Bill Murphy (06:59)

Well, so it wasn’t originally. I mean, I had properties before I got into the I just wanted a vacation home for myself, you know, you know, 15 years ago. And what I realized was these kids are staying at the beach properties during the off season. And and I and I started to pique my piqued my interest that there’s acad there’s an academic rental opportunity. And then there was the summer rentals, which is the Airbnbs and the the VRBOs and all that. And so when I bought my vacation home, I was like,

We need to, you know, I need to explore this. And, you know, I I fixed up my vacation home and then I turned my vacation home into a rental property, bought another home, then I continue to buy these properties. And then, you know, it’s been managed by our management company o over the years and they pretty much handle everything and between the bookings and the Airbnb’s and the and the student rentals has been a blessing.

Joseph Crooms (07:52)

from when you started, what is your what is your volume monthly now that you that you you know, that you’d made this transition, you know, how what is that turns into volume or revenue for you monthly?

Bill Murphy (08:03)

Just on those properties alone, what do we have? Seven seven of those properties.

Yeah, you know, I I think I think the I think the gross the gross rental is probably three quarter of a million dollars you know on those seven properties over the course of the year. you know, we have mortgages on most of the properties, expenses of course, and lots of expenses, of course. so you know, we we’ve renovated, we’ve we’ve had to gut some of them, you know, we’ve you know, there’s things it’s wear and tear. When you rent to the student community, you have to be aware that

These kids are gonna trash your trash your spot trash your place. And they they have a they have a they’re gonna have a security positive that they’ll probably lose, but like it’s not just them you have to buy a new couch. It’s the wear and tear. It’s you know, hopefully they’re not partying, but they’re partying. Hopefully, you know, and hopefully they’re respectful, but you we do occasionally get we do occasionally get the students that that really aren’t. So we know that that’s

Joseph Crooms (08:50)

Yeah.

Bill Murphy (09:00)

That’s the risk and reward we have that we have to deal with. So we we, you know, I’m constantly renovating, I’m constantly trying to clean up the properties to make sure that they’re good for the vacationers when they come because they don’t want a lived in student home. And if it feels that way, then that’s a that’s a bad that’s a bad take.

Joseph Crooms (09:17)

Do you have a a property management company that you that hire for that also? Yeah.

Bill Murphy (09:22)

Yep. They do with they deal with both the student rentals and the and the vacation vacationers.

Joseph Crooms (09:27)

Let’s talk about your mortgage company. How has your mortgage company lent into your portfolio and and and made you such the visionary that you are?

Bill Murphy (09:37)

Well just being ingrained in real estate and mortgage lending, you you see you see it all, right? You see everything. You see foreclosures, you see short sales, you see credit issues, you see people overextended. You you you you we get more information on a mortgage application than most doctors get with their patients. So like there’s a and you and you I portfolio everybody, I look we look at everybody’s situation. Like there’s a lot you can tell between someone’s bank is bank statements, their credit cards, it’s

spending and their credit report, what’s on there and what they’re doing and how they’re living. And we don’t use it against anybody, but we try to we try to advise and and help them. And if they’re if they have a bad blueprint of spending unnecessarily and living beyond their means, we try to we try to professionally guide them in the right direction. And that’s very common. You know, a lot of people have the nice house and the in the fancy car, but they live paycheck to paycheck, which is very scary. I see it all the time.

Joseph Crooms (11:08)

How do you market your st it’s away from your your mortgage company, I really like what you said, but how do you market the the Airbnb, the not the Airbnb, but your your vac vacations home or your student rental now? How are you

Bill Murphy (11:22)

Yeah,

so I let so pretty very good good question because I let the management company handle it, right? And so but when I noticed there’s a gap, like, you know, we had one of our properties, it wasn’t rented 4th of July, and I’m like, Are you kidding me? How’s it not rented 4th of July? So I actually took all the pro I took that property and I I showcased it on my social medias and said, Hey, come on down there, Gansett, Costa Living. You wouldn’t believe it. This is the first time in years we’ve had one a rental open a vac a vacancy on 4th of July.

And just by posting that, it was gone in a day. You know, so I I jump in proactively if there’s an opportunity to, but I try to be hands off as much as I can and let and let the management company run it. And they do a pretty good job.

Joseph Crooms (12:03)
Would you th th the fact that you you you witnessed this, would you would you do more marketing on your own from from this point?

Bill Murphy (12:09)
I if necessary, yes, but it’s not necessary because we’re pretty you know, we’re at 80 or 90 percent capacity. Which I’ll take all day long.

Joseph Crooms (12:17)
so a lot of things that you have said are are very keen. What’s been the key to keeping your machine running smoothly?

Bill Murphy (12:24)
just seeing opportun just seeing the opportunities out there and and and just not being closed minded to anything has been really eye opening and you know just with the the bonus depreciation you know I had some really smart people in the in my financial world tell me that like this 1031 exchange would serve you nicely because you can take that bonus depreciation next year and it help offset some of your your taxable income. And so

I’ll probably keep doing that, either adding a property or 1031 and exchanging and moving up where we can continue to take that bonus depreciation and offset our income liability, tax liability.

Joseph Crooms (13:01)
Now I know with every operator that I’ve spoken to, there’s a moment when things just got real, Bill. Okay, maybe a deal that just went sideways or time you had to pivot fast. You mind sharing one of those moments with us?

Bill Murphy (13:14)
There’s a lot. don’t have all the all that all that time. so Rhode Island, the state of Rhode Island had a a lead base a lead paint based disclosure that you had to clean up all any houses with lead lead paint issues. So I had I had one property that I had to we had to vacate and it w took two or three months and we had we ha we had to de-lead the whole house and that was that was

you know, a huge expense. We lost money on that property that year, a couple of years ago. You know, I had another property and believe it or not, it was it was near the water and it was a split level. And there’s a a mechanism, probably a five dollar mechanism where you flush the toilet and that mechanism works and it shoots the water where it’s supposed to go to the to the street level. Well that mechanism broke and it flooded my whole basement and it went up it it went up through to the

To the second floor, the damage we had to gut that commission with that property for since from October to June of last year. So those are the things you pull your hair out on, and it’s like insurance and getting and getting the workers in there, and then insurance, and then getting work the insurance, and then more bills, and did the insurance take care of that, and there’s deductibles, and the insurance is not approving that, but they did the work and

Joseph Crooms (14:13)
We we were out

Bill Murphy (14:36)
So like that kind of stuff where the management company can’t handle and you have to handle. So you have to be prepared to pivot on those days when you have to take control or it’s your money. because everybody’s gonna get paid, but then you we need to negotiate and we need to we need to set the record straight on what was approved and not approved. So there’s those are a couple of the instances where those are rainy days.

Joseph Crooms (15:38)
I’m happy can smile about it now. Bill, let me ask you this, Bill. Commercial versus residential. Which one do you feel is going to be more profitable in the future? For me.

Bill Murphy (15:49)
so what I actually did, and this might be a good a good lesson for our listeners here, when I I was in the been in the mortgage space for 20 years, and what I did in 2007 is I bought my first commercial property, but I bought it to to occupy it. So I paid myself rent, and that was a nice that was a nice enhanced income revenue stream. And then when we outgrew that space

We got a bigger property with a two-family next to it and it and it had we had tenants. We had probably 10 tenants in there. And we got a bigger space on a busy road where big visibility. And we rented that space and we paid more rent to ourselves, to myself. And we rented the other property. Now, right now that prop that first property that we had, that commercial, is being rented by a financial institution. They’ve had a five-year lease lease and they just

renewed for a seven year lease. So I’m not gonna do anything with that property. That’s just a beautiful income stream and and they have their own vendors and we just, you know, we we take good care of them because they’re a good client, a good tenant. And then, you know, so and so there’s I like the idea of having your business and the property as a tenant and talk to your ta talk talk to your tax advisor about the benefits of that will do for your business. It’s a great it’s a great strategy.

Joseph Crooms (17:09)
Thank you for sharing that. that’s the kind of stuff people don’t really talk enough about talking about your pivoting move and I just added a question before I got here. But honestly, it’s what separate folks who just dabble from the ones who stay in the game. Let me ask you this. what do you focus on solving next and what’s your next real goal?

Bill Murphy (17:27)
Well, the the next property is the is the i is a move up for for that 1031 what we’re we’re putting on the market. I I don’t I so s here’s a big mistake that I’ve made in the past and I’ll share this with everybody. I didn’t go view a lot of my properties. I’ve had either on video or whatever. I bought properties without ever seeing them, because I know the cash flow. but one of the this property that we’re we’re we’re getting rid of.

It cash flowed, but it wasn’t in a great area for rental. And the community doesn’t like the student rentals in that community. It’s the one area, it’s an area outside of where all the URI students are. They’re just they’re a close-knit community and they don’t like it. So we had a lot of resistance. and and by not viewing that property, I I probably would have it’s nice for the vacationers. It’s a good vacation.

home because it’s right next to the water, but it’s not good for the community with the student rent if they’re not very toler tolerable of that. And understand that. So that was one thing I wish I I probably should have did my homework on. So you so you learned, but that’s the one we’re 1031 exchanging.

Joseph Crooms (18:27)
Okay. The next move can either compound things or create chaos depending on how you play it. Now I know a lot of our people listen are either early in the journey or leveling up and I think they’ll benefit from hearing this. When it comes to building relationships, I’m talking business, y your new idea, what’s made the biggest difference for you?

Bill Murphy (18:49)
be a connector. Look to connect people without expectation. Look to give. So like when I first got in the mortgage sales, right? When I first got into sales, I was told, you know, never ever quote rate. Don’t be an order taker. Order takers will say, you know, what’s your rate? And just say, it’s six and a half. Well, I can get six and a quarter on a row. Well, okay, I just lost the deal. What’s your rate? My rate, that’s a great question, but let me help you get through this first. What are you looking to do?

man, I’m going through a divorce. I have to buy her out. I don’t want this. And they tell you their story. Now you repeat their story. So that becomes not transactional anymore. That’s relational, right? So now we’re adding value. That’s the new thing. We add value. How much value can you add? But now I think it’s a step further than that.

Can you out give your competition? Can you outgive to people without expectations? If you’re a giver and you’re always looking to help somebody else where they are and not trying to either take advantage or get one up.

And you do that, you do things where you’re giving of yourself, it’s gonna come back to you tenfold. And you know, what one of the things that that that we did with when we got in the mortgage business is you know, I had a mentor of mine telling me that I needed to start giving because I had a little success. And I was like, I don’t owe the world anything, I just work hard for my for my success. And the second I started giving, we partnered with Make-A-Wish 20 years ago, and we’d be giving every single month to Make-A-Wish.

those kids with a critical illness, right? And and they they they get their wish and we’ve been partnering with them for 20 years. We’ve raised over a million dollars and we do this on behalf of our clients for every time we close a loan, we get back to Make-A-Wish. And it’s all kinds of other partnerships, other partnerships. But what what that relationship has done is that’s come back to me probably 10 times the amount of what I’ve given or raised because I started I I started giving. My business has never been better and it’s always

It’s always improving in the tough years, the bat you know, the tough years and the the trying times and and when we need to pivot. You know, I just feel like when you’re giving and you’re genuine and you have have the the heart to serve, you know, life will be great and rewarding.

Joseph Crooms (20:51)
And thank you for that, Bill. And thank you on behalf of all the kids of Make-A-Wish. I’m pretty sure they thank you, but to hear that story, it’s and and the the humanity, I appreciate it, my friend. Yes, so so listen, we’re getting near the end. So you know, you can’t fake relationships, but how you define what a relationship is is I hope our listeners will take that away from us. All right, before we wrap up, if someone wanted to reach out to you, Bill.

Bill Murphy (21:02)
Thank you.

Joseph Crooms (21:16)
Maybe collaborate or learn more about what you’re doing. What’s the best way to reach you? And you can say it twice for those that may be fumbling for a pen. Even though I’m telling, get a pen, write it down now. They’re gonna fumble. So repeat it.

Bill Murphy (21:27)
twice. Sure that you can go on my website, thebillmurphy.com. You can reach out to me there or or yeah get me on Instagram. It’s billmurphy_thrive. billmurphy_thrive. Reach out, DM me. Happy to happy to connect and you know have a one off conversation if if anybody needs a a little bit of guidance or or you know maybe I could learn something from somebody else. Always try to

Joseph Crooms (21:49)
All right. Repeat it one more time, Bill. Somebody

Bill Murphy (21:51)
billmurphy.com is my website and if you want to reach out to on Instagram, it’s BillMurphy_thrive.

Joseph Crooms (21:59)
Okay. And some parents may be going to Rhode Island, they may be interested in the vacation or they can stay how can they contact it? Same way?

Bill Murphy (22:05)
Yeah, yeah, absolutely.

Joseph Crooms (22:06)
All right, sounds good. So perfect. Well listen, I appreciate your time, Bill. Your story, your perspective. We need more people in spaces who are doing the the the the right thing the right way. Thanks again for being here. yes, and for those of you tuning in, I know you got value from this. Make sure you subscribe to our channel. We got more conversations coming with operators just like Mr. Bill Murphy, who are out there doing real business, but more than the real business helping real people.

in a in a meaningful way. So we wanna thank him for that. We’ll see you on the next episode of Investor Fuel Real Estate Pros podcast. Bill, tell everybody, talk to you soon.

Bill Murphy (22:44)
Talk to you soon, everybody. Thank you.