This week, Aaron Norris is joined by Shayna Golbaf. She is a real estate investor based out of Riverside and has actually grown up in real estate. It is actually her side hustle as she has been an educator for 15 years and is currently an assistant principal in Riverside. She is also currently going through a Ph.D program at UC Irvine for its leadership and education. She is studying Spanish, and she loves to travel more than anyone. Aaron met Shayna as part of a non-profit board. She was voluntold to run for Mardi Gras queen, and she did not even realize what was happening until she showed up and her picture was already plastered on the posters. True to form, she already ended up winning the entire thing.
When she and Aaron met at Cashing In On A Boom, she trusted him. She has originally told him about her real estate at the aforementioned nonprofit event, and he wondered where she had been all his life. She had been under the radar, so Cashing In On A Boom was her introduction to this network of real estate investors. She was his secret weapon. A lot of people thought it was strange that they did 7 hours of new content. They decided they cannot be experts in everything, so they covered four very specific things at this event. It was adding square footage, mobile home park investing, accessory dwelling units, and short-term rentals and vacation rentals. She was plan B for when cities made it illegal, and she had not really taught it prior to this. He had always been interested in this model. She received great reviews since people were really interested in a different way to look at things.
Aaron began by asking her how she got into the business and how the collating strategy has changed. She has been through a full cycle and has seen a lot. Aaron asked her how she got into real estate and when. She said her mom had always engrained in her that she would buy her first house at 21. This was the norm in their family. Both her and her brother did this and have continued ever since. She quickly realized she did not like to have to pay for things. She started renting out rooms in her house, and this would help pay her mortgage and more. Once she realized this, she kept going. This was 15 years ago, and it has changed.
She had a rental property she was renting to a family, and as the market started changing it was hard to find good families she could trust. One day, she decided to experiment and post one of her condos as a place to rent as well as the individual rooms. What she found was she was getting a lot of responses for the individual rooms because Riverside is a perfect location. You have four different universities all close to the freeway. She thought she could make more than renting to one family, and it is less drama. A lot of the people she rented to were young professionals in the graduate program or were just starting out and not able to afford a house yet. They needed something to rent while they saved money, so it worked out really well and was a good “ace in the hole.” It’s a good way to utilize your property and make more with a better clientele.
Aaron was excited since he had seen the professionalized version of this model. Last February, on radio shows #579 and $580, they interviewed Sterling Jawitz of Common. Based out of New York, they basically sub-lease since they did not have their own inventory at first. This is a really good way to get into the business if you don’t have the money. You can do master leasing, rent out per room, and manage the process. As long as the landlord is getting their monthly, why do they care? He thought this was really cool, and he was introduced to the rent by room model at a much more elevated level. There are so many different companies like Common, Ollie, Node, and Dwell. Their approaches are all different. Some of these places look like they are straight out of HD TV and are super high end. They are really creating a lifestyle, and it is not about shelter anymore. One price gets you the price of admission to your room, internet, utilities, furniture. Some even goes as far as providing cooking things like olive oil and salt and pepper.
It is a really creative way to get into the business if you are just getting started. Aaron got really nervous one time when real estate investors would call in after having strictly run numbers assuming they would do rent control. An example was six months ago when he received a call from somebody in Palm Springs who bought a house just assuming it could be a vacation rental. He did not understand that the laws had changed and they were requiring a much more expensive permit than he was expecting. There was a limit to how many times he could rent out the space per year.
Last week on the radio show, they interviewed Senator Bob Wieckowski, the Senator behind all the accessory dwelling unit regulations. He basically said he is not done yet. Cities are looking at vacation rentals at the same time. They think if they are going to override the ordinances at the local level and state and say you have to allow the granny flats in the back of properties, they are going to regulate vacation rentals at the same time. He does not want investors to get caught off guard, and you really are the ace in the hole if you have been running comps hoping to rent out he sucker at top dollar at short-term rental. ADUs are the next best thing and one of the reasons Aaron was really excited about this strategy.
This is a great alternative just in case the city changes, and it is just happening now. San Diego did it this year, and Anaheim previously did it. We learned on the radio show last week he is not done yet and is expecting another round of regulation regarding accessory dwelling units in 2019.
Aaron asked Shayna if she typically owns condos or if she owns houses too. She said it is actually mixed, and typically they are 3-4 bedrooms and 2 bathrooms. In the short housing, the renters are also typically young professionals, but not college students. Shayna said she was worried about them, and the people who rent from her are more Masters and Doctorate students. Bachelor college students can be more about the experience and partying, and this makers her nervous. She found that young professionals, ones either just out of college and trying to get their professions going or ones continuing their education do well. This works really well through UCR since it is not too far away. Typically, their ages range from 25-35 years old.
Aaron asked if the turnover is high, to which Shayna said not really. However, if they are a graduate student, they will be there for at least a year or two depending on how long they need to finish. She had one from Japan who was an international student through UCR. He was not there during the summer, but he still paid to secure his spot. She also finds that because you have those young working professionals or students, they are not there as much. They are either studying or working. When they start working, they are super dedicated and give 120%.
What she found is they really are renting a room, and this is where you go into the basics. She does not supply a whole lot other than your basic furniture such as a couch. She does not even provide the television since no one would use it. She has the typical silverware and a chair available, although she has found a lot of times that people bring these in themselves. It is like going out of town and renting a condo at the beach. She will find they stay from 6 months to up to 3 years. When they move out, you have the other rooms rented, so it’s not like the cashflow changes that much. Turnaround time is fast because you are only dealing with cleaning out a room. She was finding with the whole house that she was having to replace the carpet and touch up the paint because of the wear and tear. Typically, if you three different roommates, they can be part of that. You can have different people come view the room, and you can see chemistries and what would be a good fit.
Aaron wondered how places like Common got around real estate law when it comes to places being senior only. He said they cannot discriminate. If you have a 75-year old show up in a house of 24-year olds, you cannot deny them. So far, she has not had any bad experiences with the housing, for which she is grateful. She works with an attorney to create a contract that works for her, which is smart. She has had it to where in the kitchen there is a white board with the basic duties. She always explains to people to be respectful and clean up after themselves. If they can do that, it is not that big of a deal since they are usually talking about 3 or 4 people. If one person is carrying their weight, then you have other people who are going to either communicate with them or her. After this, they work to solve it.
Aaron asked if she rolls internet and utilities into the price, and she does it two different ways. To rent a standard condo of about 3 bedrooms and 2 bathrooms, it cost about $1,500. The most it has gone up to is about $1,700. However, she can rent the rooms for $650 each. This includes the two downstairs that are the typical 10 x 10. The master was renting for $900, big difference. When she first started, she said she would include the utilities and had the internet. This was fine, but she found in the summer months the utilities increased. However, it did not make that much of a difference and she always calculated 12 months to figure it out month to month.
She also has tried it where the utilities are on them. They register, then split the cost. This worked out, except it was more work for her. The gas and utility bills come in at different times, so she had to calculate the different months. In a sense, you are pro-rating since it was in her name and she was passing on how much it was. However, it did not always align with the first of the month. It also complicated things when somebody moved out. Therefore, it was easier just to include it.
Aaron wanted to see how rent control would be affected by the election. He does not really see how you can really rent something that she has since it is on a “by room” basis. He thought it was protective, which was interesting. He has not seen any specific regulation around shared co-living and shared housing space. Shayna said you can also fluctuate with the market. When you have one person move out and the market has gone up, then you put it out there for more. You can then quickly know whether it is too high or not.
Aaron asked what the longest time is she has had a room go vacant. She said she will typically fill a vacancy within a week. He next asked her where she gets her leads from, and she said Craigslist. Aaron was surprised this is her primary source for finding leads. Typically, if she knows somebody is moving out after they give a 30-day notice, she will work with the contract and everything. She and the other party will agree. No one has been against it, but she will show it a week before they move out. She will always find someone and has never had a problem with this. You only need to find one rather than trying to find the right family.
She will hold open houses because originally when she would make appointments, people would not show up. She would hold an open house on Sunday and be there from 10 to 3, and people can show up anytime.
She found this helped with the rent because she would have people coming, and sometimes they would turn into bidding wars if more than one person showed up at the same time. She will always invite the other renters to be there as well to see. People will want to know who they are living with, and she will always get their thoughts on it. With that, it has worked out really well. When people are renting a room, they are renting a room. They pretty much stay in their room, which is interesting. She does not furnish the rooms either, just the main space. She has a bed and dresser available, so sometimes she will put furnishings if needed. She will rent the garage out too as an available space to rent for their car.
Aaron asked what the first year was she started testing this method. She wasn’t sure, but she estimated about ten years ago when the market was getting warm. During this time, it was getting harder for a family to rent. If she put it out for $1,500, she would not get many bites. This is typically what she will gauge it with when it comes to the pricing. As the market crashed, she was also having a hard time. She did not really care about selling and always approached it like she was in it to win it. She wanted rentals because it was about cash flow.
Aaron asked if she bought most of her things before the downturn or at the bottom. She said it was the latter, and this is why she is looking at prices now and saying they are too high. It does not quite make sense now, even with the shared housing costs. However, she has locked up a nice portfolio and all of her properties are the co-living concept. However, she said this is not completely the case since a couple are still families. Aaron asked if she is thinking of converting them. She said yes since she likes the variety.
She goes with a lot of intuition, and this is why it is amazing for her to hear from different perspectives. Before, she had gone off of whatever worked. Location was a big factor too since you have the universities that are close. This is your prime real estate since you can get UCR students, especially international. At UCR, she found they are renting their shared housing, and it is $700 to share a room. This is outrageous and why she is charging them $615 for them to have a room to themselves.
When he was living in New York City, Aaron stayed in a residential hotel on Broadway and 77th. It was a hotel they had not touched in 40-50 years, and it was two rooms with four guys. This included two bunk beds in one, a tiny and moldy bathroom, cockroaches that would come up and stare at you. In this apartment, each of them were still paying $600 per month. College housing is no joke, so she must look amazing compared to their other options.
When the market started to bottom then started to go up again, Aaron asked if there was a specific point where it was easier to start renting per room. Aaron asked if she saw a difference, which she said not really. She had not really studied her trends. She had just gone off of putting it on Craigslist and seeing how many responses she was getting within a day. Based on this, she would then see if she either needed to lower it or have a plan B. When she realized the money was so easy to make, she continued it. A lot of it is referrals now in the sense of people graduating and know other people or have graduated and are just getting started living on their own. A lot of times people will call her to ask if she is renting something, and she will say no but she can buy one. This is something she has actually done.
A couple years ago, she knew somebody who was having a hard time finding a place. She bought a property for them and filled the rooms. She also keeps all her things within an easy drive. Now that the market is getting a little soft, her plan is to hold these for a while. She enjoys having rentals and has not had a bad experience yet. She enjoys it and has found she has met some really good people who she has been able to help along the way. Everyone sees her as the assistant principal, her main job, even though she makes more of her money on the real estate side. However, she still does education because she loves it.
Aaron said one of the ways he likes the way they are building the education online is he gets to interview people who do these different strategies and learn where they originate. What was fun about having Shayna on stage during Cashing In On A Boom with Iris Veneracion and Patrick Diamond was her way of doing the vacation rentals was so starkly different from them. Patrick was so about the experience from soup to nuts. For Iris, she said the experience was the beach and that was it. If you want to know about the lifestyle brands doing this, go back to radio shows #579 and #580 to learn how Common got started.
They are now building their own inventory, and some are fancy. There are mid rises where the bottom floors have a coffee shop and a yoga room. They said that in San Francisco, they are even putting together events to where you can meet your local council member. Shayna said we may not be there yet, but a lot of her locations do have a pool. This is why she enjoys the condos because they have the amenities for which she is not required to pay. She serves on the board, but Aaron cannot serve on the board since all the non-owner occupied were kicked off it. However, part of her serving on the board means she cannot buy anymore.
Shayna has been through a full cycle, but to her things have not changed so drastically. This helps her gauge her prices. She has made more renting the rooms than with a family. This is not just per month, but it also means less in turnover. By this point, she has had some of these properties over a decade. The repairs she has had to do are minimal. Aaron is encouraging people to listen to possible ideas. You can think about senior housing this way. Aaron had just had a conversation with somebody the other day about how autism has exploded. You have a lot of parents having to plan or people who cannot live on their own. She has had some investors rent to special needs, and it is specifically their niche. Aaron wondered what it takes to prepare your property for this special niche where that specific tenant is probably government funded. Their length of stay may be far longer.
Shayna said before she did the shared housing, she contemplated doing Section 8 housing. There was a lot of paperwork and other things that come along. However, this is for another show.