Jay Feldman 0:00
What is up everybody and welcome to the mentors collective where I’m bringing you entrepreneurs from all walks of life to help you create your business, grow your business build passive income. And on this episode because I love the topic of passive income so much and because I hate the idea of it so much, I brought in an expert in a model that we’ve all probably heard about, and that is the Airbnb model. And this guy is I’m gonna introduce him in a second, but he’s super special. He’s doing $500,000 a month on his Airbnb listings, and his other rental endeavors. So I’m super excited, and we’re honored to have him on the show. With that being said, Max, thank you so much for joining me and my audience has a lot to learn from you. And go ahead and introduce yourself. And thank you for being here.
Max Khagan 0:45
My pleasure. Thanks for having me. Hi, everyone. My name is Max Kagan. I started out working in the Airbnb industry around five years ago. I started with one property in Manhattan that I leased my sublease and I grew from there and now I’m trying to talk about hotels. So to long journey but I’ve started small and it’s getting bigger and bigger as the months go on. So I’m excited to share what I have said about the business and see if I can help anyone possible. It’s super exciting and I’ve got it I’m gonna probe you with questions. I hope that’s okay because I really want to dissect really how you got into this thing how long it took you to build what is now I would consider an empire $500,000 a month is not something to blink your eye at how long ago did you first start making those investments and creating those listings? So I started on five years ago, I’m having actually started with renting my own apartment I was flipping houses at the time in Brooklyn, and that no income because it has slipped you buy, renovate and sell it’s a process and no income so I thought about this Airbnb model. I knew people were doing it so actually packed up my bags for my apartment. I started Airbnb and I saw work and I saw that there was nice arbitrage between how much you can rent a place for a long term, long term rental, a 12 month lease how much you can get short term from Do it as a short term rental. So I started with one then it just kept growing from there and 210 2030 100. And just going up from there. So I started in New York, I tried a few different markets. I started Puerto Rico, try to upstate New York, Mexico, Colorado, Jersey City, do more markets and no long journey. There’s been ups and downs, but I’m working on
Jay Feldman 2:23
Yeah. And five years, that’s actually a lot less time than I imagined it would take to build what you’ve built. So that’s super impressive, and kudos to you. Now the other really important and impressive thing that I kind of want to point out and harp harp on is that you did this starting with renting out a bedroom in your own home, you didn’t have a ton of money to go invest in buying properties and leasing properties. You started small you saw the profits from it and you took those profits and went and I guess rented another place that you then went and rented out for short term.
Max Khagan 2:55
Yeah, crap. I rolled my money to other properties and bought some investments. Go there and just kept growing from there. Awesome. That’s amazing. Yes. The reason business so great is because you can start with minimal investment, thought small and get big you know, you don’t need to start big don’t need to start big exactly as they say in real estate to like you don’t need a ton of money to start. So what are some of the main lessons that you learned when first starting to run this model? Start your business. Obviously, when you’re starting anything new, you’re about to lease your first property, you’re really investing your money in this with this plan that you’re going to lease this property then go ahead and sublease it. You’re going to list it on Airbnb, what were those first steps? What were some of those lessons that you learned in those first, like six months, I’ve learned a lot and I had a lot of mistakes along the way. I mean, they’ll learn from your mistakes. If you don’t, then you’re bound to fail eventually because not every business is like smooth sailing like people think. But when I first started, I started with my own apartment, and instead of renting it out on my second apartment I got was actually a great apartment. It was a four bedroom, two bathroom apartment and it was a 100 First in New York City, there’s actually a great apartment I was what I knew. And the research I had, I had picked the right apartment to do it on. I learned that having a lot of people think that with Airbnb and some of these other websites, you can just post any apartment, but there’s a lot of competition out there. So you want to make sure your apartment or your house has nice finishes and designed correctly and it’s not just some furniture that’s thrown together and yeah, because people who will not book it. So first of all, when I got was actually pretty nice and I did a decent job with the second apartment I got was not so nice. I thought it was gonna work. But it didn’t. It’s important to like really take care of your apartments and your homes and make sure they’re a place where people want to go. It’s not just posting the apartment or listing. generating cash flow, takes time and takes effort and takes a desire to work.
Jay Feldman 4:48
Yeah, so talk to me a little bit about what kind of goes into creating a successful Airbnb listing. You
Max Khagan 4:54
bought the place, obviously you got to put together some photos you need to manage it. I mean, I don’t I’m sure now you don’t manage all the places yourself. So what goes into the operational aspect of this business? Sure. So I’d say I’ll kind of run you through an apartment or home from start to finish. So first finding the apartment or home a good location that will work. There’s some different software’s out there that are pretty good for that. I’m showing you what the rates would be if you were to lease them out. One is called air DNA codes pretty great to do that research and find a few listings and contact the broker owner and tell them what your plan is that you want to lease it for a long term period and sublease the property not everyone will be okay with it, but some will, you might need to pay them a little bit extra in rent or getting an extra security deposit because the business it’s not like a person that’s renting it and then i would i would design it really tastefully I could probably get a designer you don’t need to go once upon the furniture but I would say go a little bit nicer than IKEA. It goes a long way and people appreciate it. If there’s big areas in the home where you think you can make an extra bedroom. That’s sometimes a great idea to add extra New big misconception is that studios in one bedrooms do a lot better than four or five bedrooms. But in reality, there’s a lot less supply of the four or five bedrooms. So those tend to do pretty well your competition feels a lot less, because obviously every hotel is considered a studio, one bedroom. There’s a lot more of that. So from there, I would furnish it to the nines now get a really experienced photographer, come in there and take excellent pictures. That’s really a selling point. So pictures are really key. That’s really everything. So you want to make sure you have excellent photos. That’s really the selling points you want to know that your photographers are do i mean now I’m sure you have some that you love to work with. But when you first were looking for a photographer, or did you go out ask around to friends for a photographer, but a lot of times you can call different brokerage firms. And they usually have good photographers because they take photos of their real estate post online all the time. So usually have good people contact probably some brokerage firms in the local area.
Jay Feldman 6:55
Sorry, I cut you off, you can go ahead and continue.
Max Khagan 6:58
Okay, from there, we’ll post the list You want to give details on where it is why it’s a cool place to be a big thing is putting a really, really good title. That’s the first thing people see you want to, you want to have a unique title that jumps out at people, you don’t want to have a boring title. It says one bedroom, two bathroom in the Lower East Side, you want to have something more exciting. So that’s a big selling point as well. And yeah, from there, I posted a look at the competitive rates in the area for one and two bedrooms. And it might take a couple weeks to kind of figure out like where a sweet spot is, but eventually we’ll find it and you want to make sure you’re on top of the rates and raising them accordingly. And you want to be setting like minimum stays. You don’t want to be letting people stay for one night. Usually, it’s a hassle it’s not worth is that one set of like two or three nights. Yeah, from there. I’ll be renting it out with some different software’s you can use to let people into your homes. There’s different doorknobs and door handles that are electronic that connect to the Airbnb. Those are pretty good. So I’ll probably use one of those to keep the cost down. Do you have a recommended one? Yeah, right now Links working pretty well and does connect to a lot of other property management software’s not sure if it connects directly to Airbnb. But even if it doesn’t, you can set the code on your phone, just tell the guests instead of going there meeting all that. That’s kind of in a nutshell.
Jay Feldman 8:15
Okay, that’s awesome. That’s less steps than I thought. How about when a guest leaves? Do you go in there personally wash off their strip depends. wash it down, clean up the droppings is you hire a service to come do this for you.
Max Khagan 8:30
And what does that service generally run? I don’t do myself, my own cleans something really important is to train your cleaning staff to really look look through the apartment or home and make sure there’s nothing broken or messed up or has any damages because if there is you want to report that to Airbnb immediately and take some security deposit or figure that out. That’s super important when you’re considering someone cleaning your home. And yeah, I mean, it depends where you are. All different cities and states are going to have different rates for cleaners. So it might be less than your Puerto Rico might be less than Miami. It all depends where you are. But I’ll probably call a few different cleaning ladies or companies to shop around. Right. Gotcha.
Jay Feldman 9:11
Okay, awesome. Yeah. And these are short term rentals three days at a time here and there. And I know everything. Everyone’s talking about COVID right now, but talk to me about how you’re kind of dealing with what’s going on now. Are you seeing way increased vacancies, especially in New York City? It must be crazy. Talk to me a little bit about what you’re experiencing?
Max Khagan 9:29
Yes, New York. New York has been extremely vacant. It’s been really tough. And same with Miami, Miami is getting hit pretty hard right now. So that can be really tough. My model kind of works well for what’s going on right now in the economy, and in society. So a lot of hotels usually have the front desk lady and a lot of personnel walking around the hotel and a lot of common space. My properties are really just rooms. So you’re entering the room on your own. You’re there’s no one you need to interact with. You have your own keypad and make your own punch code. getting in there. There’s no one, there’s no one going in for cleaning during your stay. And that’s pretty good right now, because no one really wants that. And you’re also cutting costs. So it kind of works out. But I mean, yeah, that’s how I’ve been operating and happens to work for this given time. But yeah, a lot of the occupancy rates and adrs and red cars have really slipped, and it’s been difficult. So I think there’s gonna be a lot of, it’s gonna be a lot of opportunity to maybe buy some properties that are distressed in the next coming months.
Jay Feldman 10:27
Yeah, and you just said most of your properties, you rent out one bedroom at a time you never do the entire property or is that a tactic that you’ve experimented with and you found better results one way or the other? I usually rent out the property at a time. I just find that like doing like one bedroom at a time is just a lot of busy work. Absolutely. And now you’re doing something a little bit different. You’re doing hotels, talk to me a bit about how you got into that and how that works.
Max Khagan 10:53
Yeah, so basically, instead of just doing one off units in different locations, I’m really essential. Taking a group of humans that are already together and running my operation on the whole building our hotel Airbnb is just another booking platform that lets us to book a room. So booking com Expedia, Airbnb, those are all booking platforms. Airbnb, people think is different because you can post your one off listing on it but it’s a really essentially the same around the hotels like my Airbnb. These are the one claim per stay with yourself check in and I try and provide more beds usual and I try and make sure my hotel rooms have kitchenettes in them. I think that’s nice selling factor compared to just a room with compared to a regular hotel room. Yeah, that’s what I’ve been doing. It’s been working. People liked it.
Jay Feldman 11:42
So you list the hotel rooms on Airbnb. Yeah. So
Max Khagan 11:45
it lists the hotel rooms on Airbnb, booking.com, Expedia. I list them on everything
Jay Feldman 11:49
all together. Awesome. Very interesting. You’re taking that model and you’re scaling, which is what it’s all about. Yeah, very cool. All right. So now for some fun stuff. You’ve been in the business for five years. Do you have any craziest Airbnb story. Maybe your guests like shout on the walls, what’s the craziest thing that you’ve heard, seen done, or experience that you’ve had.
Max Khagan 12:08
So I have one interesting story of a friend of mine that’s in the same industry. In his business. He really focuses on New York. And in one of his units, he had a squatter is water in one of his units. Now, we can’t get that person out. And it’s a little complicated with all the all the restrictions and like lease obligations you need to have in New York State. So that’s a pretty nightmare story. In terms of someone just ruining your operation. That’s one. I wouldn’t really be worried about that story I have is I set up a I set up at Airbnb a few years back and I set it up in the slow season which is January, February, March in New York. And like during the slow season, if to drop your rates because there’s less clientele and you got to destroy units, you got to drop the rates and my rates are really low on this brand new apartment had When the cleaners came on, checked out, there was weed everywhere and all the beds were broken. And the place was totally trashed. So that’s kind of my nightmare story about one of my Airbnb ease. But in general, I don’t really get those type of clients who are usually respectful. That doesn’t really happen. So everyone’s so wants and so often you’ll get that I wouldn’t probably say less than once a year.
Jay Feldman 13:23
Okay, so I have a few questions about both of those stories with the squatter, you can’t call the police and have them kick the squatter out. That sounds ridiculous.
Max Khagan 13:31
Yeah, it sounds ridiculous. I don’t have all the details on that story. I just know that he’s dealing with that. So there must have been something that went wrong with this day and I’m sure that I’m sure the squatter is a professional squatter, so he knows like all the rules and what to do. So he got kind of screwed there. That’s pretty easy. That’s, it’s pretty hard. It happens.
Jay Feldman 13:50
Yeah, it’s horrible, cheating the system and screwing somebody’s business. Anyways, I hope that never happens to you. And going back to the second scenario. Which is where they destroy the apartment, your brand new apartment and I guess it was listed through Airbnb So in short, but I’m sure their security deposit didn’t cover for broken beds. So what happens in that scenario?
Max Khagan 14:11
So I did get some money and Airbnb did cover some of the some of the problems, but they don’t cover everything sometimes. But I mean, they did help us out a little bit. But yeah, and that scenario, I basically had a buyer with a new and there was guests coming the next day. So it’s like harder to find the beds and mattresses and clean the apartment and we got nervous that the person will come back because obviously they’re a little crazy. So we had a change on the door locks on the front door. So that’s why it’s actually really good to have electronic door door locks and keypads because you could immediately pose once so much. Exactly. Yeah, that’s my story with that. But that’s
Jay Feldman 14:48
life as a business owner, you just have to roll with the punches. Okay, to conclude this thing, what are some of your best Give me three of your best tips for aspiring entrepreneurs who want to create this form of Passive income and start creating their own Airbnb listings and making money this way. What are the biggest lessons that you’ve learned?
Max Khagan 15:07
I guess one lesson would be really do research on the market and find out what kind of units are doing the best in that market, I find that even the bigger units are better, but you want to really see the two the one bedrooms, the better or the four bedrooms better. So you want to find out what that is. And yeah, that’s super important. Number two, I would say you want to really make sure your property stands out and has some unique characteristics to it. I’ll give you an example. I have a house in Puerto Rico that I bought and it was a four bedroom house and I converted to an eight bedroom house and it had a swimming pool and I built it into our hot tub there and it has a roof deck so that property is super unique and it really jumps off the page when people are scrolling through properties in Puerto Rico to go to that always as well. The occupancy is super high because there’s nothing like it on the market. So that’s that’s number two and number three, our religious Make sure to design a properly nicely and not just throw us Before furniture in there and just throw it together and just make sure the make sure it’s a nice apartment or home initial but kitchens nice. The bathrooms are nice. And it’s well kept and cleaned in house.
Jay Feldman 16:11
All right, awesome. Max, thank you so much for joining me. I’m going to call you when I go to Puerto Rico. We’re planning a trip to somewhere I’ve never been on ago. Take a group estate, your house. All right. Again, thank you so much for coming on the show. And if you’re watching the show, and you found some value in this thing, I’m going to make max come back and answer your questions. So drop your questions in the comments. You can DM me at Dr. Jay Feldman. If you DM me mentor or mentors, you’ll automatically be entered into a raffle to win a special interview with me and Max, will you make yourself available if there’s any specific questions about Airbnb? Would you do that for the guests?
Max Khagan 16:46
Yeah, I will. I have actually have an Instagram page. It’s called the air formula. So you could find me on there and just dm or message me with any questions you might have
Jay Feldman 16:54
perfect and I’ll link your contact information, your Instagram in the show notes. And again, all Awesome episode. This is something that I’ve actually been really curious about for a long time. So answered a lot of my questions. And that’s what mentors collective is all about bringing in people who are doing a whole bunch of different things to give aspiring entrepreneurs the right direction. So thank you for joining me. If you’re not already subscribed, kind of subscribe button, drop me a like and drop us a review. Thank you, Max, have an awesome rest of your day. And peace out. This is Dr. Jay Feldman. And I just wanted to take a moment to thank you so much for your support, and also ask you for a little bit more. If you can take the next 10 seconds and write us a review on iTunes, Google Play or Spotify. Just let me know your feedback. It means the world to me again, thank you for watching. If you love this episode, please share it with your friends. Share it with your family. Until next time!