 and this is Vacation Rentals Are the Future. Welcome to the show. And today I have a very special guest on with me, Brandy Barton, co-founder of Loma Homes. Just a little, before I introduce her, just a little quick bit about what's going on in the vacation rental industry right now is vacation rentals are the absolute gold standard for investments at the moment, for real estate investments. We are seeing so many investors jump ship from long-term rentals and get into short-term rentals. So never has there been a better time for you to start educating yourself on how short-term rentals work, on strategies behind it, and different ways you can get involved in this industry and start generating income from short-term rentals, despite the fact of all of the chaos that's going on in Hawaii with restrictions that keep getting put in place. We keep seeing more and more of those. We're gonna see more coming up in 2023, but that's not the only place you can invest right now in short-term rentals. You have the world to look at. So today we're gonna be talking to an expert in short-term rental design and theming. She's the short-term rental theming queen, and her properties are doing more than double the cap rate of what a standard short-term rental does. So please welcome Brandy Barton to the show, co-founder of Loma Homes. And Brandy, thank you so much for being here. Thank you so much for having me. I'm excited to chat up today. Yeah, this is great. I've known Brandy now for a long time. I think, what would it be, meet like six years ago, five years ago? We probably, we probably met four years ago, worked together starting two years ago. Okay, cool. Yeah, it was somewhat, I know it's been a little while and I've had the pleasure of actually getting to see you in action from ground zero all the way to the end. I'll never forget that experience because I don't think I've ever seen anybody pull together a short-term rental the way you did. Just to give you guys some insight, Brandy is like the Dr. Seuss of design. Like, when I say that, I mean like she's so, the way her mind works is so far out there when it comes to the kind of risks that she's willing to take that are so different than anything I've ever seen someone do and it's paid off big time for her. So her one property in Orlando is actually generating a 17% cap rate. The standard for Orlando right now and at Vrolio, we do short-term rental data. So we actually know this factually. The standard cap rate is 3% on a property her size. So she's actually like quadrupling or more of what the other short-term rentals are doing. And the way she did that, and I'm gonna let Brandy tell us about it is by just going crazy with how she themes these properties. So we wanna talk a little bit about that strategy, Brandy, like how you got involved in this, like how you were able to like make that jump, take these risks, tell us a little bit about what you do there at Loma Homes. And also I'd like to show you guys some of those properties while she's talking. Thanks for that introduction. That's way more nice than I even deserve, I feel like. But it's been a fun ride. We started in traditional real estate about 10 years ago. And then four years ago, we decided to do our first vacation rental. We thought it would just be a traditional vacation rental. We thought, oh, this is a good market to be in and you're making good returns. So we started with one in California and it went so well, we decided to go again, but we didn't love the political climate and some of the different factors in California. So we started looking for another market and that's when we came across to Orlando. And when we decided to invest in Orlando, we were like, what would make us stand out? And that's our whole process is figuring out how we can be the top 10% of any market we're in. And it's not gonna be universal across the board because what you're going to make in Orlando is gonna be different than what you make in Hawaii or what you make in like the Poconos Mountains or in a Park City ski resort. So what you need to do is like look at your specific market. So when we decided we're gonna go to Orlando, we said, what are the top performing properties? And when we looked at them, they were themed out properties. And especially the ones that had like custom made items that almost look like a theme park, then the ones that were like right below this couple, couple really good ones for ones that even just had like bed spreads and stickers on the walls and their theming was not that hard. And we're like, we could do this and we could do this better. So I got on the phone and on Google and just started calling people and figuring out like, how can I make a theme park based house basically? Because what are people going to Orlando for? They're going for Disneyland and for Universal Studios and Legoland and all these awesome family attractions that we want to take that experience and make it memorable even after you go home from the parks and to extend their trip to make it something that kids will never and not even the adults will never forget. So our houses have spaceships in them that you're sleeping in. They have sound effects, a little flight simulator thing. We have dragons that actually roar. We have little museum artifacts in one of our houses in the dinosaur house where it tells you all about the dinosaurs. You're sleeping in a giant jaw. We have Wizards Way, which is a wizard themed house where you can sleep in a train that has a steam engine and controls. There's just things all across the board where you get an immersive experience and feel like you're a character in these movies or like you're almost at a theme park and on a movie set. So the reason why we did that is because Orlando is specific to that market. When we go to a beach house, so we have a bunch in Destin where you're in a beach area, be similar to Hawaii, we look at what guests want there and they're looking for a beach experience. So we can still do theming, but it's more like pirates and sailors or a unique something to make you stand out on Airbnb and be comparable to what those guests want. So that was a year full. That's like so, but it's so needed because everything starts to look the same and saturation of properties on Airbnb is at an all-time high. And a lot of people think that they can just go buy a house or buy a condo. And because the destination is nice that they're gonna be able to rent it out. This is not the case anymore. I mean, we see it in the data that saturation is so high and if you don't have an alternative strategy, not just with what you're purchasing, but what you're gonna do with it after, your odds of success are gonna be pretty low. Now, what would you suggest? Like if you were gonna go into a beach market, I know you have some properties in beach markets, but it wasn't like a theme park market. How would you approach that market because you took some really big risks in Orlando and it paid off big and it was also expensive, right? How do you know, you know, how big of a risk to take in each market and how far you should push the boundaries? Yeah, so like I mentioned before, we're very data-driven at low mohomes. So we have a formula and like specific criteria for everything we do. So we're in different markets and every time we go to a new market, we're looking for a place where we can get the highest revenue per the lowest house price. And that's the starting point to kind of narrow down markets. Once we get into that market, we're now looking at opportunities where we can add value to a house. So if you can find a duplex that you can turn into a single family home because then you can offer more bedrooms in your rental or if you can find a house that has unfinished basements, you can add bedrooms that way. Like bedrooms are cash in vacation rentals. So we try to make as large a property as we can for the lowest price, like price portfolio there. But not only do you need the size of the house, the next step is making a standout, which is where the theming comes in. So our budgets are actually determined by what we call the 20% rule. We need to be able to purchase and renovate the home for 20% of what the annual cost is for the house. So, I mean, sorry, what the annual revenue is. So annual revenue should make 20% of what the purchase and the construction costs are. And that's what we need to do. Yeah, the gross revenue. Yeah, so gross revenue should be 20% of the home purchase plus the construction costs. You can also just do a home that's ready to go, but a lot of times to hit that 20%, you need to do the add value. And that's what we specialize in is finding houses that we can add value to. So we hit that 20% rule every time. So it might be a little bit lower in some markets. You might be down to like 15% to get a good investment or whatnot, but that's kind of our formula we work with. So we get creative in that. So Kyle, my husband does our real estate purchasing. So he'll find a house, he'll say you have a $100,000 budget to do this house. And I've got to get creative and think, okay, if I've got $100,000 to make this a good investment, what can I do that's creative? And there's a lot of things that are not necessarily more expensive. You can do certain wallpapers, you can do different paint colors and unique staging with your actual furniture. A lot of it doesn't have to be creating dinosaurs and fireworks, crazy items like we do in Orlando. That works well in Orlando to stand out because the competition is so fierce. But in a beach market, people just want a beautiful place to stay and you need photos that stand out to others. So making your house look like it's professionally interior designed and have some bold colors in there and very nice renovated kitchens and bathrooms, those are the things that sell. And if you can put it around a theme, like you can do one, for example, we have a beach house at our best performing beach house in fact, is a 1920s themed house and we call it the Beverly. So it's kind of a girl's trip getaway, which is awesome because it's got pink velvet couches and it's got pink flamingos and it has lots of like girly things on it. And my husband and my other business partner, Jeff, were like, are you sure about this? Who's going to want to run a flamingo house? Cause they're in the like boy mindset. And I was like, I told you so. All the girls are the ones booking it. The wives are booking them for their family trips. The girls trips are going there and it kills it. In fact, you'll see photos on the screen. This is one of our top performing homes and you don't see any dinosaurs in there. It's just a very strategically done renovation where we turned a duplex that only had three bedrooms into a single family six bedroom home and then just decorated it beautifully. So you actually bought it as a duplex and you knocked out the middle wall and you did like this for renovation on it like that. Yeah, and in this case, it was a top unit and then a top house with two bedrooms and like a one bedroom apartment in the bottom that they rented out. So we just connected the two and rearranged a few things to make it into six bedrooms. Oh, that's awesome. Yeah, no, I love that, Brandy, because not everybody I think would be able to do the crazy things that you did in Orlando, although that's kind of what it takes to hit those numbers, right? Now, I think what people don't know as well about you is that you also have to hit these numbers because you're using other people's money as well. Like you're running a fund and that's a big responsibility when you're taking other people's money and you're promising them a certain return. So you have to really trust your strategy. How does that fund structure work that you do and how do you, and like, at what point did you feel like, okay, I really am confident now that this strategy works and this formula works every time that I can start taking more money? Because I know personally, by taking other people's money, like that's a totally different pressure than when it's your own. Yes, 100% and it's been a process for us. So the very first house we did, we did with our partner and ours own money to test out like vacation rentals. And then the next couple of houses, we just sit on a one house per basis where we brought investors in and they were gaining ownership in that one house. Once we knew that the market was working and we knew what we were doing in the vacation rental world and that it was like a good next move, we started a fund where we do a bundle of homes that an investor invests in and they get a partial ownership based on how much they invest in and they get equity in the homes plus a preferred return. And each fund has a little bit different terms but that's the base of what our model looks like is a preferred return and equity ownership in it. And because of that, we have to make sure, like you said, our properties have to return even better investments than a standard one where you're buying on your own because we have to have enough money to make really good returns for our investors and also have enough money that in our profit split, we can run our business. So like you said in Orlando, that one is like a four times what the average cap is. Even our beach houses, the other ones, we're still doubling revenues of what the average house does. And it's not about putting the theme park in there. It's all about being strategic in what you buy and what you put in the house and the renovations around it because there's so many factors into creating a solid vacation rental. And that's where getting a local knowledge like an agent who knows where the good neighborhoods are or they will say, hey, you need to be a couple blocks from the beach. There's data out there like the platform you guys are creating or Air DNA or Price Labs. There's lots of tools out there that you can use to find the data to figure out what pockets are most profitable and that's where you make your money. Yeah, absolutely. And a lot of that too is, what we've been exploring with data is a lot of it, you also need tourism data to support the number of incoming tourists there, right? You wanna see the trends where there's markets that are growing and then there's new opportunities. And so I know we've been working on layering a lot of that data in too because we really wanna hit those markets where there's new opportunity, right? Cause going into, and I wanna talk to you about this is going into 2023, I think there's no denying that the economy is shifting, right? Some people say we're in a recession, some people say we're not, but what's guaranteed right now is there's definitely 7% inflation. And so that means people are spending 7% more to go on vacation. How do you think that's gonna look going into 2023? Do you think that people are gonna look to go to more drive-to markets instead of flying their whole family somewhere? Or do you guys have a strategy for that going into 2023 of like what markets shifts you're expecting and you're pivoting for? Yeah, in fact, it's something we talk about a lot here especially as we're acquiring and scaling our company is where do we grow? And one thing we've seen is like you said the drivability, so we've started or continue to invest and expand in places that are drivable. So for example, our latest market we invested in was the Poconos and that's because it's a driving distance to a lot of different cities like New York City, Philadelphia and the East Coast that's a destination where people can get into nature by driving. So they may not be flying to Europe anymore instead of working they go in their own backyard and we were able to find that from data and I'm really excited to see your platform and the data that they're creating because it's going to be next level front. We had to really dig and almost like scrape and create our own formulas because it's not out there right now but that is what we see is kind of going into those driving and nature people and millennials love the experiences. So a lot of the people traveling now want to go places where they can experience and if you can create a home that just encourages and enhances that. So not only the theme park ones but if you do tree houses or trailer like tiny homes or the air streams. A lot of those trends are killing it on Airbnb right now and on the different vacation rental platforms because they're unique and provide that experience. Well, yeah, and it's funny you mentioned tree house speaking of unique stays because I've been really looking hard at those lately and what I like about them is because they're on stilts you can actually buy land that nobody else wants because maybe it's in a flood zone and it's really hard to build a traditional home or put a mobile home on or something like that. You can get the land really cheap and it could be a nice piece of land and then put your tree house there because really all the tree house is is a tiny house on stilts, right? And so like this trend has been taking over the North Carolina mountains and I think a lot along the East coast and also out in California but the ROI's are huge on that. Like people don't have to spend a fortune on a big expensive million dollar house anymore to do something that's highly profitable. They just need a strategy like you're talking about and I think what you guys do really well is that you know who you're going to be servicing like you know who your guest is gonna be and I think that's one of the reasons why you guys have been so successful is because you spent so much time in your data building those algorithms out to figure out like who are we going to be marketing to and then you build the property for them and a lot of people don't do that and I just wanna say that you guys have done an awesome job with that. Who kind of like spearheaded that part of your program because most funds don't do that and that's a critical piece when you're investing in vacation rentals is really studying the data on who you're marketing to. Thanks, yeah, so our Loma Homes is made up of three founders. It's myself, my husband Kyle and then our business partner Jeff. So Jeff is our data geek. He worked for a company that did e-commerce data before starting Loma Homes and he just is hardwired to love data. He was like scraping data and using spreadsheets like I've never seen before. So he handles all the market research and also the optimization of our properties once they're up and running. So we do in-house property management remotely and he, we use a lot of technology to leverage that and to optimize our bookings. So not only is about building the right house but you have to market it and use the right tools online for people to even find your house and find an insertion whatnot. So he's really good at doing that and we're actually developing a product ourselves that it optimizes on Airbnb specifically. So that way you'll show up on, it's almost like search engine optimization for Google except for it's for Airbnb because he got so good at it for our own properties. We're like, why not start creating it for other people because people are missing out on this who are hosting on Airbnb. So he does that and then my husband, the other business partner, he does the real estate side. So buying, selling, doing a lot of the like behind the scenes transactional type things. Awesome, so you guys are a really good team. Tell me a little bit about like, you know, when you got into this for the first time, really when, I guess like when you realized that this was what you wanted to do because people get into short-term rentals, you know, vacation rentals and, you know, a lot of times they, you know, they're testing it out ends up being more work than they like. You've stuck with it, right? So when did you realize like, this is really where the money's at and this is what I wanna do? The funny thing is with our story, Kyle and I, my husband and I were flipping houses and doing long-term rentals and Jeff was our friend and he approached us about building him a vacation rental. So we had the experience in real estate. He was looking for somewhere to invest and so he did all of his data research was like, I want to build an investment in Josh Retreat California because of all this data, it's the best place to be in vacation rentals. And so he said, I haven't really done anything real estate. I know you guys do remote flipping and we were traveling to multiple states doing our real estate investments. So he said, can you build me a house there for a vacation rental? And honestly, we had no idea where Josh Retreat even was but we knew the principles of real estate applied and all this is market. You just gotta research and get to know the boots on the ground there. So we said yes and we built it for him and we didn't think much about it. It was a one-off house. He was doing a one-time investment. We were just building it and he was a client for us. And then after we built it, which was a lot of fun but we thought it was just a project, it ended up bringing in I think double what we expected. So he came back to us was like, we should do this again and we should create a business out of it. So then we started buying more houses and I got to the point where we stopped flipping. We stopped doing long-term rentals in our apartments and stuff and focused solely on vacation rentals. And he at the time when we did the first house he had a full-time job, he quit his full-time job. All three of us went all in on vacation rentals and like this is the biggest thing for your buck. Yes, it takes more work but you're gonna make more money in these investments than any other real estate investment especially right now. So why not put your time and focus on this where we could be one of the first in the industry to do what we do and to kill it. So it's been worth it. We've been doing it for a full time for about three years now. So that's awesome. And now I know you guys too, you're kind of like in the process of actually selling one of your portfolios. And you and I have talked about the whole cap rate valuation exit strategy for a while. This is something I've been trying to teach my investors for years because I've done that myself. And you're the first one I've seen really do it right. So what I'm talking about for those of you listening is that Brandy and her team have spent years building up these vacation rentals as a business asset, not as just a house, but this is an actual business asset. So you would never sell it at the standard appraisal value of a regular house. You're selling it at a business valuation and in real estate and commercial real estate, we have the cap rate valuation model which is applied to commercial real estate. But since these are businesses, those of us like me and Brandy and kind of those getting in early to short terminals that have enough to do the exit, like we're trying to apply those same methods to short-term rentals and it does work as the market adopts short-term rentals as its own asset class. So Brandy, you're in the process right now of putting that cap rate valuation. So what you were generating on the house was X cap rate and you're trying to sell it at Y. So for those of you listening, the way you do this is you wanna generate as high of a cap rate as possible. And then when you sell it to an investor, you sell it as low of a cap rate as possible and that's where your spread comes in. And this is what Brandy's in the process of doing right now. So Brandy, can you tell us your experience so far of trying to sell an exit from this portfolio as an investment portfolio? Yeah, essentially, like you said, it gives you the opportunity to add value not only as a real estate, like putting construction into it. That's the traditional way. But you can add value by managing it well and optimizing the revenue because you're buying a property. If it's never been a vacation rental and in the current market, really you buy a property based on the comp. So you're buying it at real estate, residential value. And then if you have enough of these, you bundle them together and you sell them as a portfolio, like a business. And you can sell it as a cap rate. So we love the fact that it's almost like you can pull lovers. If you can minimize your expenses, figure out how to really optimize your like property management practices and then you can optimize your technology to make as much revenue as you can, you're making more money when you go to exit. So for us, it's been an interesting process. We've had lots of interest and potential buyers within a variety of classes. There are high net individuals who are looking to invest. There's also more of like the institutional investors and big names that are dabbling in this right now, especially if you have a large portfolio. There's investors wanting to diversify with their family offices and want to add vacation rentals to their portfolio because of the fact that it's high yielding and they can offset some of their other lower performing items right now. So it's been a little bit difficult because there's not very many people that have done it yet, but there's a lot of interest in it and there's a lot of potential issues slower moving. So the sales process, the due diligence has been longer than traditional residential, but we're under contract now for a bundle of our properties and we expect it to go through, which is really exciting because this would be one of the first in the short-terminal world to work like this and we're hoping that it just continues to grow and it makes a standard for the industry that these are businesses, they're not just properties, especially when you have them all up and running and a whole portfolio of them, what you're doing is selling a business to an investment group. Oh, absolutely, I love this so much and I'm gonna be following the story just like weekly with you guys because I really wanna know how this plays out for you. For those of you listening, guys, and girls, this is generational wealth-building strategies. This isn't stuff that you do one time and you buy one house and you sell it. This is gonna build you real generational wealth. If you can do this strategy every two to three years, cap rate valuations when you exit to a fund or a larger institutional buyer are no joke. If your revenue is high enough, there's plenty of money out there that will buy at a much lower cap rate than you and I ever would because like Brandy said, they're offsetting other lower performing investments that might only be at like a two or 3% return. What we know about money is there's so much of it out there that needs to be moved around every day. So every time you build up these investments and these assets, you're creating an opportunity for people with even more money to move it around when they purchase from you and that's where you make your big money on the exit. So I'd like to close this out by letting Brandy talk a little bit about for those of you that are interested in connecting with her further or investing with her doing a deal together with short-term rentals or I think she's been as a coaching program, Brandy, you do, I think. Yeah, we do. Take a minute and a half and talk about that because I'd love for everyone to hear about that. Yeah, so from the coaching side, we do offer coaching for people who are looking to get into short-term vacation rentals. We got questions all the time on how we're doing it, why we stand out in the industry that we decided to just do an online course. There's, you can check it out on our website specific to it, it's called LomaVacationAcademy.com. And then if you're looking to check out our actual properties, maybe stay in some of them, they're a lot of fun. In fact, I'm gonna stay at one tomorrow, we're going on a family vacation to Orlando and going to be staying one of the properties. That's Loma-homes.com. And then as far as investments go, Erica's right, the potential for and return on investment is crazy with this strategy of bundling and selling at cap rates. So our investors who came in, we were promising them like decent returns, but we're gonna double, some of them will even receive up to like a 40 or 50% IRR if it goes through and works as well as we hope. So they're phenomenal returns if you're able to do this cap rate exit strategy. And our goal is to do that over and over again. So we're always raising funds to continue to grow our portfolio. And we want to be a win-win where investors who maybe don't want to hold onto the assets and do the work and work to manage the properties and stuff themselves, you can actually invest with people like us where it's just writing a check and you get quarterly payments out. And then when we do the exit, you get to win big. So if you're interested in investing, definitely send me an email at brindy at loma-homes.com. I'm sure that'll be in the notes as well, but it's just my name at loma-homes.com. And we would love to check about investing. So we kind of have an opportunity for people who want to be all hands on deck and want to do it themselves. We'll teach you how to do exactly what we do. Or if you just want to be passive and you already have a job you love, you can invest with us and then we'll partner together to do more deals. Awesome, I love it. Yeah, I personally recommend, Brindy, there's a lot of bad information out there around short-term rentals. This is the one place where you're not going to get bad information. So Brindy, thank you so much for joining us today. I really enjoyed this chat. Hope to chat with you more soon in the future and have you back on the show. Thanks everybody for listening. This has been Vacation Rentals of the Future. You can also check us out at Vrolio. We do short-term rental data and acquisition. Have a wonderful holiday and we'll see you in the new year. Thank you. Bye. Thank you so much for watching Think Tech Hawaii. If you like what we do, please like us and click the subscribe button on YouTube and the follow button on Vimeo. You can also follow us on Facebook, Instagram and LinkedIn and donate to us at thinktechhawaii.com. Mahalo.