A former cocaine dealer turned real-estate investor shares how he leverages his Airbnb business to travel the world
- J Thomas Martin, real-estate investor and world traveler, overcame an early bout of adversity to become a successful real-estate investor.
- In order to garner passive income and support his love for travel, he leverages Airbnb properties.
- Martin employs a simple calculation to discern whether a deal or market makes a lucrative investment.
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J Thomas Martin, real-estate investor and world traveler, is a felon.
"I got busted for selling cocaine when I was 19, so I went to jail for a few months" he said on the "Cashflow Ninja"podcast, an investing podcast.
When Martin got out of the clink, he decided that he needed to find a legal way to make money and headed back to school.
Shortly thereafter, he found himself working in bank regulation at the precise moment the Financial Crisis proliferated.
"That really was my introduction into real estate," he said. "I saw a lot of people lose a lot of money - and then some people picking up those pieces, and I thought 'Hey! Maybe I can do that too.'"
Fast-forward to today and Martin is traveling the world on the passive income he earns from his real estate business. In fact, he doesn't even have a permanent residence.
Still, Martin's transition from felon to real-estate investor didn't happen overnight. He put the work in. He networked voraciously, bought a property with 100% borrowed money (which he doesn't recommend), and leveraged the skill set he'd picked up at this former job.
"Another person in bank regulation introduced me to biggerpockets.com," he said. "Eventually I started going to meetups - and that's when I changed from 'Hey, maybe I'll buy a condo' to buying my first 4-plex with an FHA loan."
Martin was hooked - and one purchase led to another.
"I went on to buy three other properties," he said. "50-50 partnerships with other folks, putting very, very, very, little down and doing cash-out refi's [refinances], borrowing more money, and positioning that way."
When he was introduced to Airbnb hosting by another real-estate entrepreneur, he knew he found his niche.
The Airbnb business
Today, Martin sub-leases Airbnb's around the San Francisco Bay Area. In total, he has a hand in 21 different properties.
"The fundamentals of my business are it's Airbnb sub-leasing, so most of these 20 apartments are owned by other people" he said. "I sign a lease. I tell them exactly what I'm doing - and I have the right to sub-lease it; Put furniture inside, and rent it on Airbnb and other furnished rental platforms."
He continued: "The reason it works well there for me is because there's a lot of dense population. There's a lot of jobs, hospitals, universities - and we look near public transportation."
Martin says it's a win-win for everyone involved. In his eyes, the owner of the property gets free property management (since he's doing the upkeep) with guaranteed rent. In return, Martin gets the opportunity to make passive income.
From the start of his business venture, Martin knew that he wanted to increase his time and location independence. He didn't want to be tied to a specific area, since he loves to travel, and didn't want his time to be eaten by trivial requests from tenants in 20 separate locations.
That desire led him to write a strict set policies and procedures for his team to adhere to including: the lease itself, comparables, margins, utilities, furnishings, internet connections, inquiries, pricing, maintenance, check-out, and e-mails.
"My team is responsible for doing everything start to finish," he said.
As far deal criteria is concerned, Martin uses a simple strategy to determine if he can make money.
"Basically you're looking at the spread between what can be rented as a nightly rate or a monthly rate - minus vacancy and expenses - relative to the baseline costs of rent," he said. "In cities where it tends to be cheap to rent an apartment, but expensive to stay in a long-term stay hotel, or a hotel - that's a good opportunity."
Martin says an easy way to go about this is to look up rent rates on Zillow.com and then look at comparable hotel rates. This will point you in the right direction.
As a general rule of thumb, he also prefers small studios or one to two bedroom apartments to lease. This way, his properties attract less partiers, and more business clientele. He also avoids the notorious parties cities of Las Vegas, Nashville, and New Orleans.
"Our average person stays for 57 days," he said. "About one-third of night stays in the US are for durations over 30 days. It's surprising, right?"
With his business fully operational without his strict oversight, Martin now spends his time as freely as he chooses - and he tries to mentor and guide those that have struggled as well.
"There's always someone that's had a bigger struggle that's done more," he concluded. "And hopefully we can look to those people as inspiration."