Welcome to our latest episode! Join us as we sit down with Christopher Levarek, the Managing Partner and Operations Manager for Valkere Investment Group. With a strategic mind and a wealth of experience, Christopher plays a pivotal role in coordinating the company’s operations, managing technical infrastructure, and overseeing day-to-day activities crucial for business success.
In this insightful episode, Christopher takes us on a journey through the potential of short-term rentals for generating cash flow. Dive into the world of real estate investing as he discusses the paramount importance of cash flow and delves into the impact of interest rates on profitability. Learn from Christopher’s expertise on maximizing profits through strategic property investments and discover various real estate investment strategies and opportunities that could reshape your financial future.
Christopher also emphasizes the significance of having a clear goal in your investment journey and shares the transformative power of finding a mentor in the field. Join us for an engaging conversation filled with actionable tips and strategies. Tune in now to elevate your understanding of real estate investment and unlock the doors to new opportunities! Don’t miss out on this episode packed with valuable insights from an industry expert!
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Bronson Hill: So Chris Levarek from Valkere Investments, interesting guy. He basically started with multifamily, started doing deals, started doing bigger deals then started raising money for deals. And then he decided he wanted to switch to short-term rentals.
Why would he do that? Well, it’s because the long-term appreciation play does not always pay the bills, right? And there’s a lot of people I know in multifamily that are either investors or they’re operators, and they’ve had to kind of find other things that really can cash flow.
So Robert Kiyosaki has said, I’m a cash flow guy. If it doesn’t cash flow from the beginning, like I’m out, right? So Airbnb, it does.
There’s a way to basically be able to make it cash flow, even with one house to have 60 or 70,000 netting just from one house, right, after you paid all the expenses, which is pretty great. And it’s a little harder now these days with higher rates, but it still is possible. And there are situations out there that are unique.
So we’re going to get into history of just Airbnb, how you get started, how you can do it, how passive is it, what’s changed over the years, and really what are the opportunities there.
Let’s jump in.
All right.
So I have Chris Levarek here with me. He’s an awesome guy, a friend, and he’s done both multifamily and single family Airbnbs.
Chris, welcome. How are you today?
Christopher Levarek: Thank you for having me. Appreciate it.
Bronson Hill: Oh, it’s good to have you, man. I know we were talking, we saw each other a couple of years ago at an event that’s been a little while and you live in Southern California. Don’t you live in this area as well?
Christopher Levarek: I’m actually next door. I’m in Arizona. You guys are all coming over here.
Bronson Hill: But that’s right. Yeah, that’s right. So they’re all coming over to Arizona.
So let’s talk a bit about your background. I know you are big into you’ve done a history of multifamily. So we have some similarities there.
You’re raising capital, kind of doing some stuff there. And then you’ve more recently have really started ramping up the Airbnb model of teaching people how to do Airbnb. I’ve been very interested in this as an investor because it’s very high cashflow if you can do it right.
Right. And there’s some that, you know, can work really well. And there’s been people talking about that.
It’s slowed down in certain areas. But why don’t you talk to us a little bit about your story, kind of take us back to the, you know, how you get started in real estate and then walk us through multifamily and kind of why you kind of made somewhat of a shift into some of the Airbnb stuff.
Christopher Levarek: Sure. Okay, cool. So, yeah, I have a background in IT, but prior to that, I was actually military, I was a firefighter for the Air Force. Moved to Phoenix after my military career and got into IT.
I went to ASU, so I got a degree in IT and I’ve been an IT engineer for last like 12 years, ended about two years ago. So I got started in real estate in 2018 and I started building this business where we were buying multifamily property. We were dealing with a partner.
Every deal we did, we did with a partner. So our first deal was two duplexes in Durham, North Carolina. And so I got right out of the gate.
It was out of state. I didn’t buy it locally. I don’t know why I didn’t like Phoenix back then, but it was expensive in 2018 for me getting started as well.
So I found a capital partner, did a deal in North Carolina with my brother, who is still my partner in the business Valkyrie investment group. We didn’t fund the, we didn’t start the business necessarily to have a business, but it grew into that. After we started doing multiple deals with multiple partners.
We did five duplexes in Durham. We did a 13 unit then in Fayetteville, North Carolina, just south of Durham, a 16 unit in Fayetteville as well. Then we went on to partner with another syndicator and started growing that business a little more where we were raising capital.
We did an 84 unit Columbus, 120 in Dallas. The biggest one was like a three-74 in Daytona, Florida. With another syndication group and then we’ve done multifamily continued on, we made two funds.
So we have five or six B fund, five or six C fund. And we got into short-term rentals roughly in 2020. So long wind, we kind of saw that cashflow was limited, at least for us specifically, we’re kind of selfish on the syndication side.
It’s kind of limited in the beginning. You’re waiting for that deal payout at the end. So I was looking for something to basically keep my business afloat and let me hire out and grow some of the rules I wanted to grow in the business.
So I got the first short-term rental at Kissimmee, Florida. And what I noticed is the first year we grossed about 120 K gross. So even if you took 50, 60% expenses on that, you’re pulling in 60, 70,000 net, which isn’t bad for a property that cost us $625,000 purchase price.
So it gave us the ability to get that cashflow, that high return, you know, faster. The ramp up period was a lot faster than say, waiting three to five years as a syndicator on the other side of the deal. The LP, the limited partner typically gets the best then he gets the returns starting almost within three months of the deal. So on an apartment.
So that’s why we get into short-term rentals. I can go more into it, but yeah.
Bronson Hill: Yeah, that’s great. No, I think it’s a great question. A lot of things people have seen, and it really is the, the cashflow versus appreciation question, right?
I ask a lot of investors, what’s more important cashflow or appreciation and people maybe some of both, whatever, but I’m over the under the belief that cashflow to your point is far superior to making a lot of money someday or in five years or in three years. Because you still need to eat. You need to have your housing. You’ve got to figure out your insurance and your travel and you have fair, all these things.
And so cashflow allows you to do that. Now, a side question here is your group is called Valkere Investments. I know like the project, I think it was the project to kill Hitler was called, it was like Operation Valkere.
There’s like a movie about the Tom. What is it? Is it Valkere, like a bird or is it some other, like what is it?
Christopher Levarek: No, well, technically it was a deity for the Vikings. So it was like this email, I guess not, yeah, she was almost like not a God, but under, under a God, she flew with wings and she would rescue Viking soldiers off of the, the battlefield. You probably saw him in like the movie Thor’s that the girls who had the wings and stuff like that.
But we actually kind of like took it to the next level. I have a helmet up there. If you can see that, you kind of look for a little bit.
Bronson Hill: You know I got the muscles in the face.
Christopher Levarek: Oh, thanks. That’s, that’s so fun. But we did take it to that point.
We want it. So Valkyrie is actually an anagram of our last name. And then we wanted this idea of rescuing people from, you know, this lack of knowledge or the uncommon knowledge of investing in real estate.
So we were rescuing the W two earner and that kind of stuck and it was a fun.
Bronson Hill: Yeah. So on that note, let’s, let’s talk about Airbnb, maybe the numbers look great. Especially if you bought a few years ago, because your payment would be lower. How does that work today when rates instead of 3% or more like seven and a half, 8%, like how does the number still work or is it just depending on the area or what kind of a, like, well, I guess, can you give us an example of a property today that’s like, here’s something we’re seeing and here’s what the numbers generally would look like.
And just an example of just he can make something up, but just something that’s kind of what we do.
Christopher Levarek: Sure. So you’re totally right. Like you can’t go buy where you used to buy in 2020 or even 2019, 2018.
A lot of people are buying in where we bought Kissimmee, Florida, Orlando. They were building a lot of these neighborhoods for short-term rental only houses, and so the supply was very limited. Now supply is different.
Interest rates are different. But same with like Destin, Florida, huge, huge location people are buying in. Now you try to go get something it’s 1.8 million and you’re paying seven and a half for an interest rate. So it’s definitely not going to perform a property in Destin.
To give you an example, like seven bedroom, six bedroom might pull 200 K gross, which, okay, that’s great. But if you bought a 1.8 million dollar home and you have a seven and a half percent interest rate, you’re probably not even breaking even on that. So you can’t buy in the same places. Phoenix, Arizona had fit 13,000 listings added in 2022.
You know, just so many people have come rushing into Phoenix for long terms, multifamily and short-term rentals. Because of the Scottsdale demand and a lot of, so it’s hard to stay competitive in these areas at a seven and a half intro interest rate. It’s just not going to be the same if you’re buying at super elevated prices and you got all this supply.
So knowing all that what I tell people is, okay, well, don’t buy in those areas. Go buy like the Midwest is really hot right now. Even like Michigan, Illinois, a lot of these areas you wouldn’t think of Kentucky.
Tennessee has always been kind of big for, if you think of a Gatlinburg Pigeon Forge, those have been kind of big names in short-term rental space, but you just have to buy at a discount now. You can’t buy at the same prices as you did before. I just saw this thing in Michigan that is in a cool area, just outside people coming out of Chicago, they want to drive all the way through and go on the lake in Michigan at a discount or at a short term rental, and you could get a short term rental in Michigan,in three to $400,000 and it might gross around $80,000.
So you’re looking at 30% revenue price to revenue ratio, which is that’s usually what we look at starting out as kind of like a back of the napkin. You know, what is this ratio? If I take the revenue and divide it by the purchase price, what’s that ratio?
If it’s in the 30% range, you’re, you are really baking in a big buffer. That’s going to help you there. So that’s my suggestion.
Look at markets where it makes sense in that ratio.
Bronson Hill: Yeah. I know there’s a lot of data out there now. There’s AirDNA, there’s other sites that kind of help you with getting what rents are and how occupied things are. So I guess with someone who doesn’t own one of these, I guess it just comes down to buying in the right market.
And you said getting at a discount. What are you like trying to almost do like wholesaling or like flipping or trying to find your own properties and turn them around or doing yourself and that kind of thing? Is that kind of a way you can get a little bit on the front of it and then renovate it the way you want it.
And then that way you’ve kind of gotten a little bit better deal on the buy and built it for kind of optimize for Airbnb as well.
Christopher Levarek: That’s what we do. That’s what I like to do for the new investor. You know, people we, we kind of coach and talk through in our book, we don’t necessarily tell them to rush into that because it’s kind of tricky knowing after repair values and knowing how to do renovations.
But I’ve always liked value add all our deals in the beginning, our duplexes were all BRRR’s. So they were all go in, buy it at cash, all cash, add value, refinance, pull out your money. You can do that with a short term rental.
Obviously, if you’re buying at a higher value, it gets a lot harder to do that. But we’ve used hard money loans to do that. We bought a property with hard money loan, added the value, added the renovations, and then refinance back out as a short term rental.
So you can do that as well with the short term rental. And I’m talking $900,000 purchase price. So you can do it with a hard money lender like that.
And right now it’s a little expensive to do that kind of thing. But it is possible to add that value upfront and then, and then do a refinance on the back end. But you do have to make sure your holding costs and everything you’re doing during that renovation period, you know, is going to make sense financially.
Bronson Hill: So yeah, that makes a lot of sense. And then when people manage, I know you have like, if somebody has a rental house, that’s one type of manager that might charge, you know, a 10% to manage a single family house. So I have some background in this, but I know it’s a little more intensive when you’re doing, you know, Airbnb.
So most people, the people that you’re working with, are they managing these themselves? Do they have kind of like an automated system or a manager that kind of helps them? Or what kind of fees do people kind of generally pay for that or cleaning or all the stuff that goes into that?
Christopher Levarek: Yeah, so the people we work with, they typically work coaching them to manage it themselves. And there’s a couple of reasons for that. But one is the taxes are amazing with short term rentals.
So you can get a COSSEG study done on the rental you purchased. And a lot of the people we work with have a job. And so getting the COSSEG study done and managing it themselves allows them to apply all that depreciation or those losses straight to their active income.
Unlike in a syndication, passive losses go to passive income. With a short term rental, you qualify it as business income. If the average of your stay is under seven nights for the year.
Say you’re doing a midterm rental and you rented like six months of the year, that’s not going to work for you. But what people do in this space is they get a short term rental, get the COSSEG study benefit, manage it for a year, hand it off to a manager after a year, and then go get another one the next year. And so at any given time, they might only be managing one rental, but it is a great reason to manage it.
The other side of it is you probably will pay 20 to 25% to a property manager if you outsource the management.
Bronson Hill: So the management, it doesn’t seem like it’s a crazy amount of worries, just kind of like another thing you keep up with and make sure things are going well. And you can you people do it out of area as well. So wherever you just live where you want and invest.
Yeah, that makes sense.
Christopher Levarek: We have five we manage in house ourself and we’re not property management company. I suggest people stick to the one or two it can get if you have, it just depends what kind of market you’re in. If you’re in a market where you’re and the kind of stay you’re doing, if you’re letting people stay for one night, you know, you’re going to have heavy inquiries and turnover, right?
Because if you if you’re occupied 60% of the month, and you’re all doing nightly rentals like a Motel six, you’re gonna be super busy. Whereas if you have, we rent minimum five nights day, and you do three bookings a month. Okay, well, that’s like three times you have to interact with someone you pretty much booked half to half the month already.
So yeah, maybe three quarters of the month depending. So it just depends what kind of property you’re saying, you can make it light on management, you can make it a lot heavier. But I’d say it’s good.
A person for one to two rentals, you’ll be fine. You know, it’s an hour a day or an hour, hour a week and not impactful. So yeah, you can do it with your phone too.
Bronson Hill: And you have your, your book, vacation rental millionaire method, which is some of that came out recently. Well, what do you think like these days and with higher rates and just buying, you said like buying in the right markets, is that really one of the like the biggest key is just make sure you buy in the right market, make sure that you if you can get something at a discount, those are kind of a couple any other any other tips you have for people that are getting started?
Christopher Levarek: Yeah, I mean, be sure to use the data. It’s just like in multifamily vibe with logic have a little bit of emotion reason. So emotional is like, I’m taking a risk.
I’m taking a chance. My grandma lives in the area. That’s kind of emotion reasons why you’d buy a place, but balancing with that data from air DNA is a good resource.
Mash visors are good resource. Go check where people are moving, where people are flying to is another good one where people, you can check where people are going, the hottest destinations. You know, if you want to do a destination Airbnb, I think there’s a great chance right now in multifamily as well, but in short term rentals as well to find properties at discounts.
Like we discussed, you can pick the markets that have discount prices, but you can also go look and find a property that’s been listed. And this is easier in single family, but you can go look and what has been listed for over 125 days, you know, and there, there is a lot of properties right now that are doing that. And then what does that do?
That creates opportunity. You go to the seller or even better, if you can go to a for sale by owner guy, cause they, you’re talking direct to the seller instead of an agent. Right.
And you say, Hey, look, you’ve been on, you’ve been on sale for 125 days. What’s the price? Can you take this price?
I can do this now, you know, and you might get a deal that way. So that’s buying at a discount instead of that that’s the opportunity right now is really the power negotiation is on the buyer side of my opinion.
Bronson Hill: Yeah. Yeah. It reminds me too.
There’s also, there’s a guy named Cody Davis. I don’t know Cody, but he, 23 years old, he has almost 200 multifamily units and he did them all with seller finance or seller carry. And he would just, his whole method is he would go online and his way you can look at Google maps and tell which properties are multifamily.
And he would go and then even just call, he just find their number, just call them up and say, Hey, I just wanted to get coffee with you and hear about all your success. I own this other building here. I know you own this one and they get together and just start telling their stories, whatever.
And then you just start kind of figuring out what they need. And they just end up like kind of give them a property. Hey, well, you know, pay me 10k a month for the next couple of years until you stop and then you refine it.
So I bet there’s some opportunity with that too, that people are just willing to do the work. But that’s a great idea with the, the for sale by owner. Cause a lot of times we think people really what they want is just, oh, all they want is just a bunch of money.
But you know, they may have a unique thing that they’re looking for. And if you can just try to find a way to make it work, sometimes they don’t want to, they’d rather actually pay less in taxes and drag it out for a couple of years. So maybe there’s a way to do kind of a contract sale where you pay it over a series of years.
And maybe that makes more sense anyway, but that’s really great. Well, I love that you’re doing this I know you have a training program, you’ve got a coaching program, you’ve got your book. Is there anything else?
I mean, do you foresee, actually, let’s just talk for this, about this for a minute. I know multifamily has struggled a bit just from higher rates and while the bridge debt and other things like that. So where do you see rates going?
I know if rates go down, it kind of helps all investors that are buying really or have properties because the evaluations tend to go up with it’s more affordable to pay for them. Do you see rates kind of staying where they’re at? You think they’re going to come down?
Do you have any opinions on that?
Christopher Levarek: Yeah, I’m personally in the opinion that what’s gone up for a long time, most typically goes down. And so rates have gotten hiked so much over the last year that I believe it’s more likely that they stabilize and then go down versus keep on going up. That’s just what history shows in general.
Something like I was up usually comes back, get down. It doesn’t keep going up. A lot, our market’s very different now than it was in the eighties or nineties.
And so anything is up in the clouds, but my opinion is that it’s going to stick right where it is a bit here and then 2025, or maybe even a little sooner with politics coming involved, we’re going to see a couple decreases going on. Maybe not as many as I’ve seen some people saying they’re going to cut by six, six, six, six, six cuts to the interest rate or something that might not happen. But I’m positioned, I’ve taken some higher interest rates on some of the short term rentals.
I think my highest is 8.1 interest only. So those are out there with the SCR lenders right now in short term rental. And if you can make them work, the benefit is you can buy usually at a discount because nobody’s buying it and then refinance it in the 2025 era.
And that’s kind of what I’m positioning myself to do.
Bronson Hill: So, yeah, now amazing. That’s why I love it, man. That’s really great.
Well, there’s creative ways, if you’re willing to look and do the work and find a way to get it done. I guess, I just want to really acknowledge you, man, for the ways that you have developed and pivoted at times, it’s good to have pivots and we’ve gone from doing a lot of multifamily to doing occasionally and having sometimes in car washes and oil and gas and other things. I think there’s great things out there.
What’s one piece of advice you’d give to investors to kind of just starting out whether they’re short term rentals or another part of real estate investing?
Christopher Levarek: Yeah, the big thing is kind of understanding what you want to get into. What’s your ultimate goal? You know, if you, if you are super busy of three kids maybe going out and getting a short term rental and figure out all the details isn’t for you and that’s why we, in my company, we made two sides where go invest passively or go do it yourself was kind of the approach we did.
And that’s why I suggest to people, if you want to start a business, do you want to learn how to run your first short term rental, own it, get the benefits of taxes, or would you rather do it passively? Like figure out that initial goal. And it’s really going to line up with the action steps and who to follow or who to align with is going to be right for you.
Not everyone needs to be a syndicator. I did. I don’t kind of stepped in it.
Didn’t realize that I was getting into the beginning. You can just do one deal a year or be a passive investor one time a year or four times a year, whatever you want to do, but kind of start with that goal in mind and, and see if you can find someone else who’s done that same track that you’d like to get on. That’s going to make so much easier than, than just kind of throwing mud on the wall and hoping you make some money.
So that’s my suggestion. Find someone who’s doing it or, or you, you like and see if you can mirror their success.
Bronson Hill: Yeah. That’s it. I mean, finding people that have done it and yeah, if somebody’s done it. I know that, Hey man, if, you know, Chris did it, maybe I could do it too.
You know, just finding people on it. There’s ways you can do it. And I think there’s a lesson there too. Be willing to adapt and change because for some people that I’ve actually watched. Some multifamily people that are been doing multifamily for a while. Like I’m going back to get a job or they’re doing something.
There’s nothing wrong with that. But yeah, I want to like fire myself, man. I’m like, just do real estate full time.
Christopher Levarek: And there’s nothing wrong with that. I get that too. It’s just pivoting.
Bronson Hill: Yeah, it is. Awesome. And we’ll encourage everybody to reach out to you.
Appreciate you, you being on the show today. How can people get in touch with you, follow what you’re doing, hear about your stuff.
Christopher Levarek: Sure. So I’m big on LinkedIn. I try to do a lot of research out there, connect.
I feel like that’s a great neutral way to get in touch and connect. You can check out our website, Valkeregroup.com. Valkyrie V-A-L-K-E-R-E group.com.
Those are the best ways really. But I’m active on LinkedIn. So reach out.
Bronson Hill: Awesome, man. Appreciate you, brother. Thanks so much.
Christopher Levarek: Thank you. Take care. All right.
Bronson Hill: This was a great interview. I really like this. My takeaways were just to continue to take action in areas that you’re interested in learning about.
So if you want to develop more cash flow, you’ve got to actually take steps to do it. So Chris has a course. He’s got a book.
There’s different things out there, how to develop your Airbnb business. You don’t have to be doing huge deals to have it make sense. Now, we’re big on passive and firing yourself and this kind of thing.
But there are ways you can set up an Airbnb business where it is pretty passive, right? And even if it’s not passive, you can still work a full-time job. This is a way it sounds like there’s some incredible tax benefits where you can use it as business income.
And there’s a way you can use it against ordinary income, which we’re not tax people and not giving tax advice. But it is something that is always interesting to look at if there are taxable benefits that you can do. So another thing I got from this is if you have a challenge in one investment, be willing to shift or to re-examine and sharpen the pencil and look at it another avenue.
Or is it time to go back into the same one? If multifamily hasn’t been well for you for a while, maybe it’s time to, well, what does it look like now? And what are the positives here now?
Because we know that the overall market is very good for larger multifamily. So I hope you enjoyed this episode. I really enjoyed it.
If you haven’t smashed that like button or written a review, wherever you hear this show, please do really mean a lot to us. Please share it and look forward to seeing you on the next episode of the Mailbox Money Show.
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