How to Turn Extra Space Into Rental Income With Short-Term, Midterm, and Long-Term Rentals

Jess Arce (00:00)
So having done short term rentals, we actually one of the things we didn’t really realize we were doing until I look back and see it, but we don’t rent an entire house for the most part. We started off renting a bedroom that had an entrance outside of the house we were living in at the time. And so we put a lock on the sliding glass door and made it into a little studio apartment. And that paid half of our rent in Southern California. And if you know Southern California, it’s not cheap—

Michelle Kesil (02:11)
Hey everybody, welcome to the Real Estate Pros Podcast. I’m your host, Michelle Kesil. Today I’m joined by someone I’m looking forward to chatting with, Jess Arce. She was a seasoned real estate investor who began investing in nineteen ninety-nine and has achieved success in both short-term, midterm, and long-term strategies in California and Nevada. So really excited to have you here today, Jess.

Jess Arce (02:39)
Thanks. I’m excited to be here.

Michelle Kesil (02:41)
Perfect, let’s dive in. So first off, for those new to your world, can you share what your main focus is?

Jess Arce (02:48)
Well, our main focus is on investing in real estate. We have been investing in short term since twenty sixteen before most Americans knew what *Airbnb* was. So that’s been our our main focus for the last ten years.

Michelle Kesil (03:05)
Awesome. And how did you decide to get into investing?

Jess Arce (03:10)
Well, my husband started doing mortgages back in ninety seven and suggested that I get my real estate license. So in ninety nine I got my license. We were still in our twenties and my husband and I both have dyslexia and so we are out of the box thinkers and not necessarily your traditional employee. So we both were pretty much self-employed and we figured investing would be our retirement.

Michelle Kesil (03:46)
Awesome. And what have been some of the main keys that you feel have allowed your business to grow and run successfully?

Jess Arce (03:54)
The biggest thing is not letting fear stop us because most people say they wish they could do what we do but anyone could do what we do they just need to have the confidence to step out of their comfort zone and give something new a try.

Michelle Kesil (04:13)
And what have been some of the biggest challenges that you’ve overcome and faced in your role?

Jess Arce (04:20)
The biggest challenge we overcame was two thousand eight. I was a realtor and my husband was a lender. That was our full time business. We had probably six rental properties at the time and we lost everything. We went from making three hundred and fifty thousand a year to thirty five thousand in food stamps the following year. So it it was rough. And we we lost two of our properties they got foreclosed on us.

Michelle Kesil (04:51)
How were you able to overcome from it?

Jess Arce (04:53)
It took a while. It took us ten years, but we just figured out different things to do and we diversified so that we didn’t have all of our eggs in one basket like we did having everything in real estate the first time around.

Michelle Kesil (06:01)
Yeah, and how did that change how you’re investing and rebuilt your portfolio?

Jess Arce (06:07)
So having done short term rentals, we actually one of the things we didn’t really realize we were doing until I look back and see it, but we don’t rent an entire house for the most part. We started off renting a bedroom that had an entrance outside of the house we were living in at the time. And so we put a lock on the sliding glass door and made it into a little studio apartment. And that paid half of our rent in Southern California. And if you know Southern California, it’s not— So our daughter decided she wanted to move back to Las Vegas. And so we said, “Well, let’s buy a property.” And so we bought a property in Vegas. And it was a ranch style home that had a like an office. And so we turned that into a studio. It had a kitchenette in it and a bathroom, so that was really convenient. And then we converted the garage into another unit. And then when our daughter moved left us in Southern California, we moved into her bedroom, rented out the master bedroom that also had a sliding glass door to our backyard. And so my point is rather than just having one unit that either it’s rented or it’s not, we’ve got opportunities of multiple units rented. And so we have a property in Las Vegas that actually has four units now because it has a tiny house on site as well. Then we have a property near Las Vegas, 20 miles away, and that had two units. It was a two-unit property. And I told my husband, “Let’s convert the master bedroom into a unit.” So we made that into a studio. And so we have three units there. *Airbnb* told us we couldn’t do *Airbnb* anymore. So we actually have long-term tenants in all three units there. And— and then we purchased two units in Sacramento, where we’re living now, and we rent the front one long term, the back one short term. And then we purchased a home, it’s a fifty-five and over community, and we purchased one with a like mother-in-law quarter and we rent that out. So it’s really nice because we are able to continually have income coming in. So if one area is slower than another, because it’s the slow season or whatever, we still have income coming in from the various different units.

Michelle Kesil (08:55)
Yeah, amazing. And what are you most focused on solving or scaling to next?

Jess Arce (09:02)
Well, one of the things my husband and I have really wanted to do is to buy some land and possibly put some little cottages on the land. We live near a lot of wineries, so possibly having a vineyard or just having it be a an escape close to various wineries for people to get away to.

Michelle Kesil (09:26)
Amazing. And what do you think builds some of these more lasting real estate properties through, you know, turbulent or changing times?

Jess Arce (10:16)
Well, like I said, for us the fact that we have multiple units has been really helpful because like this— the market’s been slower since last January. not as many trap— people traveling to Las Vegas and so our studios, which in the past were always the units that were booked, are actually we’re we’re noticing now are not the units that are booking as much. But our larger four bedroom unit is booking every weekend. So, you know, the fact that we can always have someone in there, we know it covers the mortgage. We’re not profiting as much as we did from twenty twenty one to twenty twenty six. That was incredible because people were ready to get out and travel after COVID. However, we are still, you know, staying afloat because we have the multiple units.

Michelle Kesil (11:16)
Yeah, absolutely. And what is a big lesson that you learned that you wish you had earlier on and that you could share with others?

Jess Arce (11:27)
I would probably say the biggest lesson I learned during two thousand eight when we had I can’t even remember what the loans were called but they every year they increased because the assumption was we would make more money every year and those loans were really popular. maybe they were 2-1 buydowns. I can’t remember. But anyway, I would say the biggest thing is buy something that’s less than what you can afford instead of just what you can afford and then you know hoping that you’ll have more money coming in in the future.

Michelle Kesil (12:03)
Yeah. And are there any goals or opportunities that you’re looking forward to in real estate?

Jess Arce (12:10)
I’m really more on the end of as being a realtor. My goals are to help other people get into investment properties or just getting a new home for themselves and being able to help them with my expertise, being able to do their own investing confidently.

Michelle Kesil (12:35)
Yeah, and what does that process look like? Is that for like people that are wanting to be investors?

Jess Arce (12:45)
So, I mean I’m open to helping investors or people looking to, you know, move to another house. I I think it’s great if people want to start investing to buy a duplex or a property that can help supplement the cost of a mortgage, especially California mortgages you’re looking at, you know, at least six hundred thousand. So— or the purchase price at least six hundred thousand. So if you’ve got a a normal mortgage, you’re paying about four thousand a month. So if you can rent out part of your property and not feel like people are in your space. You you know, who wants people don’t want them in their house. But there’s so many creative ways to to alter a home that you can bring in supplemental income and reduce your mortgage costs greatly. I mean, like we had we built a *Tuff Shed* in the last house we left lived in, and it was 180 square feet. And we made between sixteen hundred and two thousand dollars a month renting that out. So that covered about half of what our mortgage is, which is great, you know, great way to reduce your monthly expenses.

Michelle Kesil (14:13)
Yeah, absolutely. It sounds like you’ve come up with a lot of creative solutions.

Jess Arce (14:59)
Yeah, yeah.

Michelle Kesil (15:00)
And what would you suggest to someone that’s wanting to get started in investing and maybe feels a little bit limited, like how can they get started?

Jess Arce (15:09)
You know, talk to a lender. there’s hard money loans which can be a higher interest rate and that can sometimes be intimidating, but if you have a plan in place, the hard money loan doesn’t have to be a stopping a stop gap for you. Traditional loans, of course, are an option. If you’re living in the property and renting some of it, you can get a instead of a investment loan, you know, you can get one for yourself. And then you don’t have to put as big of a down payment as 20%. You can even get in, we’ve purchased a couple of our homes FHA, and so you can get into FHA homes as little as three and a half percent. So you know, it doesn’t require a lot, it it requires creativity in order to take that first step forward.

Michelle Kesil (16:10)
Yeah, absolutely. Thank you so much for sharing all of that. Before we begin to wrap up here, if someone wants to reach out, connect, learn more, where can people find you?

Jess Arce (16:20)
so you can find me on Facebook for the most part. I know Facebook is kind of working its way out, but I’m a little old school. but yeah, it’s Jessica-Arce. And then I also have my Airbnbs are on a platform. I’m looking for it right now because we just we just signed up with Evolve and so that we don’t have to do all the managing ourselves. So it’s book.evolve.com/casaarcevacations. And so you can see all of our listings there. Or you can text or call me, and my business number is 916-304-3471.

Michelle Kesil (17:15)
Okay, perfect. I appreciate your time and your story. Thank you for being here.

Jess Arce (17:18)
Thank you, Michelle.

Michelle Kesil (17:19)
Course, and for the listeners tuning in, if you got value, make sure you’ve subscribed. We’ve got more conversations with operators like Jess who are building real businesses. And we’ll see you on the next episode.