Al Williamson on the Secret Behind the Extended Stay Model

Al Williamson is a professional engineer, full-time real estate investor and the author of several real estate books. He began investing in 1996. Al is best known for publicly documenting his quest to create enough secondary income streams to cover the 1st mortgage of his eight-unit apartment building (which he accomplished in September 2015). He is now trying to figure out how to maximize the cash flow of a small portfolio so it can generate enough income to replace a middle-class job. Al is a proud family man who now spends his day managing and expanding his corporate housing business in Sacramento, California.    Podcast Highlights   Who is Al Williamson?    Before everything that people know Al Williamson for today, he was training to become a professional gymnast. That was until he broke his arm on the high bar and realized that he was going down a risky path. He switched course and learned to be an engineer and started creating things. It wasn’t until meeting his wife did he consider getting into real estate. He met a guy at a church picnic that turned him on to real estate investing and after reading everything he could about the subject at his local library Al realized that it was exactly what he was looking for. Al Williamson and his new wife purchased a triplex and it eventually quadrupled in price. That early experience brought his wife on board with the whole idea and taught them plenty of valuable lessons. He leveraged that into his next purchase where he had a major focus on cleaning up the local neighborhood. It was a relationship with a local health center that later got Al into the short term rental space. One of the easiest ways to get into the real estate game and put yourself into a profitable position quickly is by leveraging short term rentals.   Was it a challenge in making the short term rental model work in California?   Initially the numbers didn’t work out for Al because of maintenance costs. Owning property is a great way to build wealth but a bad way to generate income because something is always broken that needs to be replaced. You don’t get to keep the money because it has to go back into the property until that debt service is finished. In a lot of ways, short term rentals were the answer to Al’s problems. There are a number of different ways that short term rentals solve the issue and there are tons of opportunities to increase your cash flow. By experimenting with one unit for short term rentals Al was able to generate the same net income as his three other units. The extended stay model is changing the way Al is structuring his business because the trend of people wanting to live in one place and work in another is taking off.   How do you market for long term guests?   Al has 14 different marketing strategies that he uses to bring in extended stay short term rental guests. A good indicator that your market can support the model is if there is an extended stay hotel in your area already. From there you need to get out from behind your computer and have a conversation with real people. Talking to the bartender at the hotel can yield some valuable info. Extended Stay America is doubling down on the one month and two month guests. It’s a big business and major hospitality companies are beginning to recognize that. If you’re working with Airbnb you’re going to have to put your listing together. The headline of that listing is very important and you can use that to call out the exact type of customer you are looking for. Write your headline to resonate with that person. You can also set your minimum stay requirement so Airbnb only shows your listing to people looking for an extended stay unit. Do things to separate yourself from the rest of the competition. There is a growing need for extended stay units in America, it’s up to the housing entrepreneur to step up and answer the demand. The type of the property is less relevant than the type of customer you want to serve. Stay in your lane and serve people like you because you will have a better understanding of what they need and want. You will make the same net income.  You can make your decisions based on gross income, which many people do, but only the net income really matters. You can make different decisions and save yourself a lot of time and energy and still make the same net income. Most ordinances were written to slow down transient rentals and prevent them from competing with the existing hotel businesses, but they are not intended to affect month to month rentals. Month to month rentals are the cornerstone of affordable housing and they know it.   What are some differences you’ve seen between people running a less than 30 day stay business and a greater than 30 day stay?   The less than 30 days operators are looking at serving tourists and convention goers. For the people focusing on more than 30 days, they are thinking about other features that are important to a different crowd. Things like parking and laundry facilities. They also get the advantage of business travelers being more forgiving and easy going in general because they aren’t paying for the stay out of their own pockets.   What are some alternative ways to attract your target market?   Facebook has been very effective, having your own group is a good way to let people know what you’re offering. Al also has his own website which has been a good tool in attracting extended stay guests. When you’ve been in business for over a year, your reputation starts to do some good work as well. Al has eight different categories of customers that he caters to: vacation renters, military housing, student housing, insurance housing, corporate rentals, people in between selling their homes, and international housing. There is also medical housing that’s broken down into three different types as well. You can take those categories and figure out which one you want to dominate and then start growing your funnel for that category.   How do you avoid having to evict or grant tenancy to someone?   Al hasn’t had to evict anyone because he mainly serves business travelers and they are just not going to stay. Even if they did, if they’re happy paying an elevated rent than what’s the problem?  The main purpose of a lease agreement is to turn a transient into a tenant, which means the relationship is governed by a different set of laws. If you do that, then all the ordinances and laws around the typical short term rental transients no longer apply.   What are the special services you’re offering to increase your net income?   Al started off by offering a menu of cleaning services to guests but he found that they generally just wanted to be left alone. Do you it yourself options like a washer and dryer are much more important.   Al’s Takeaway   You need a coach to help you get the best out of you and overcome your subconscious. They will also help you avoid making the basic beginner mistakes. Al would be happy to coach you and be your booster rocket to help you launch your real estate business.   Links: leadinglandlord.com Thank you for listening! If you enjoyed this podcast, please subscribe to the show on iTunes and Stitcher Radio!