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From Vacation Renter to Vacation Rental Owner Steve Schwab of Casago

Gary Pinkerton talks with Steve Schwab, former US Army Airborn Ranger and current CEO of Casago

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Gary Pinkerton hosts former US Army Airborn Ranger and current CEO of Casago, Steve Schwab. They center the discussion around short-term rental markets. Steve illustrates what people should be looking at prior to investing in this specific real estate niche. He gives us insight into his real estate business and some of the challenges he has faced. He ends with ideas on how to get financing.

Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Gary Pinkerton 0:39
Welcome to the heroic investing show, a podcast for first responders, members, the military, veterans, and anyone looking to improve their financial future and gain some freedom with their time. We teach America’s heroes how to build passive income, build their startup business and safely grow wealth through real estate and other alternative investments. We have current and private First Responders put protections systems and a team in place to help them build a life where they can focus on their passion, that service or product that they’re uniquely gifted to share with others, making the world a better place for all of us. My name is Gary Pinkerton and I co host this show with Jason Hartman. This is Episode 197. My guest for today is Steve Schwab. Steve served as a US Army Airborne Ranger before getting his degree in criminal justice police science from New Mexico State University. He took a trip after graduation that changed his direction forever. In 2001, he took a trip down to Rocky Point Mexico and started doing odd jobs for the woman who rented him a beach house. When the woman’s husband passed. Steve paid off their debts and took care of clients nearly two decades later, hailing from Scottsdale, Arizona. He runs a company called casado, which represents more than 2300 properties from 13 regional offices across Mexico and the southwestern United States. Steve was recently awarded one of Arizona’s most admired leaders for 2019. Please help me in joining Steve Schwab. Well, rock investors welcome back. Thanks so much. I think you’re really gonna enjoy this discussion I have today. It’s with Mr. Steven Schwab. And Steve, I’ll let him tell the actually I just called him Stephen. I’m not sure that has any relevance. Steve was an Army Ranger and started off with different jobs in the army for nine years. He mentioned to me before we started recording, and I talked more about his extensive background in the introduction. See if you wouldn’t mind though, please. Well, first of all, welcome. And then please give us a little bit of your background.

Steve Schwab 2:54
Well, thanks for having me. It’s great to be here and to be able to talk to you and all the first responders and military People out there. My background started off like we were talking about earlier. I was a an Army Ranger I made into the first battalion during the 90s. And then after getting out and going off to college, I decided to take a little time off and go to Mexico for the summer. And I ended up in a taking over a vacation rental property management company called Cindy’s beach rentals. And from there, we just grew it out. And I’ve been doing it ever since.

Gary Pinkerton 3:26
How in the world did you come across? How were you staying in one of the properties they were managing or?

Steve Schwab 3:31
No, just like all good military guys. I was drinking a beer. And it was a gentleman named Bruce. He was this big guy. He was talking about how you couldn’t get up on the roof. He wasn’t feeling well. And so I said I’d do that for you. So I climbed up and started doing a little bit of odd jobs for him. Come to find out Bruce had cancer and passed away and his wife didn’t want the visits anymore. Her and I talked and she sold it to me with payments and that was the beginning of my my career.

Gary Pinkerton 3:59
Wow. Okay, so I’ve read a little bit about this, but bring us bring us up to current day then with that.

Steve Schwab 4:05
Okay, well, yeah, since that time started off with just a few properties, a handful of properties. And, you know, the hard work and discipline that I come to learn through the military really served me in the, in the civilian world. And it wasn’t necessarily I was smarter than anybody else. It just tended to work harder. And finding the ability to lead small teams, I was able to put together a small team and grow it out to what it is now I changed the name to because there’ll be believed that was Cindy anymore. We changed it to casado. And now I’m in two countries in 15. cities have a couple hundred employees and manage about 2000 properties. 2000 properties?

Gary Pinkerton 4:45
Yeah. Wow. Do you own any properties of that type or rental properties in general?

Steve Schwab 4:51
Yeah, I have a I have several. I have a portfolio of my own that ranges on both sides of the border of Mexico in the US and then several cities. So not only do I manage other people’s properties, but I’ve been able to invest into my own and watch my portfolio grow, and they’re all vacation type properties. Yeah, 90% of my of my real estate portfolio is vacation rentals. Okay,

Gary Pinkerton 5:15
cool. Again, going back to the beginning there you were, you had just gotten out of milk. Terry, when you took that summer off in Mexico,

Steve Schwab 5:22
no, I, I went off to college. The idea was to become an officer. And I just never went back after I went for that summer after my fourth year of college.

Gary Pinkerton 5:33
Okay, cool. So your time off was was a break after college. I got it. Right. You did college on your own. So there was no commitment or anything there?

Steve Schwab 5:40
Right? No, there was no commitment. I went to New Mexico State University of my GI Bill and army college fund.

Gary Pinkerton 5:45
Would you study there

Steve Schwab 5:46
I studied criminal justice which I have fused nothing in in my career. The only thing I used was a my Spanish classes. And I think those are the only classes we got to see in in college. So my worst classes were the only things I ever used.

Gary Pinkerton 6:01
Well, I’ve never, I didn’t use my nuclear power master’s degree too much. I was in nuclear power all the time, but it wasn’t a Master’s course that was I was playing out, you know, so you aren’t really even directly thinking about this as transition out military kind of fell into this. But you’ve obviously grown it to be an incredible portfolio and active business, you know, as you as you’re considering, you know, who your who’s listening here who the audience is people who are really considering pretty strongly to make the same kind of a leap. Any advice for these guys?

Steve Schwab 6:33
Well, you know, when it comes to making that leap into your own business, you know, I know there’s some times I remember when I was getting organized ETS thing out of the military, kind of that security bug is gone, right? And you kind of go out and you’re on your own and it’s a very new experience and you find a lot of brave men and women who have never really like said okay, now, that financial side, the security side is gone. What do I do next? And you’ve learned things in the military and as first responders and in That sort of culture that the rest of the civilian world just doesn’t have. And if you apply that correctly with some good common sense, you’ve got a real bench in the world. So don’t be afraid to go out and step out on your own.

Gary Pinkerton 7:11
Nice. Well, what are some examples you think of that where they just clearly stand out?

Steve Schwab 7:16
Funny enough, just showing up on time to meetings is is amazing. You find so many people who don’t take their schedule seriously. So showing up to on time, the good hard work ethic, going out and getting the job done and making sure it’s done well. The attention to detail that’s taught to you through the you know, through the culture of, you know, military and first responders, also just the decisiveness, a lot of times, we have to make quick decisions. And once we’re committed, we go with them, and that’s lacking in the rest of the world stepping up, and being able to make a decision and back it with confidence and leadership goes a long way. And then we all have watched leaders that we love and that we didn’t love so much and It’s a high intensity situation to be part of this culture, and experience those sorts situations. And it becomes a learning ground for leadership of how to take care of your team, and how not to take care of your team. I always say that some of my best leadership skills come from the people who I would never be leaders, I would never replicate their leadership style. It teaches you things as a young person that the rest rule just doesn’t get, and you’re gonna have those with you for the rest of your life. You don’t even know what you’re learning when you’re in those situations. Yeah, that’s

Gary Pinkerton 8:32
great advice. That is awesome. I was just interviewing another gentleman recently. And he’s basically a corporate coach. So he goes in and helps organizations get more efficient. And he said, You know, I feel like I’m, I don’t think he said, Chief because, uh, you know, actually, he was he was a Navy pilot. I feel like I’m the Chief, you know, just telling the young, the new young guys you just showed up some of the really, really basic stuff like it’s helpful when everyone shows up. You know, some of the very, very basic that you just mentioned that the members of the military really have is a leg up. So I don’t really know that, that I have a lot of listeners that have a lot of trepidation about being able to succeed out in the real world. I mean, I know that’s out there. I’ve heard of that. I just don’t have a lot of statistics on what percentage of the people listening to this or that worried about it. But any of them that are, you know, I’m completely in agreement with you, they should just table that in the back. I mean, no going cocky, like, there’s definitely plenty, some corporate knowledge, there’s some things about how life operates in in the corporate world, or in the real world. That is different than what we did. And you can certainly mess up by going in just assuming that is, you know, another day in the military. But gosh, it should not be a confidence issue.

Steve Schwab 9:43
Right? I agree with you hundred percent.

Gary Pinkerton 9:44
So how big is your organization, obviously, fairly decent size with 2000 units?

Steve Schwab 9:48
Yeah, a little over 200 direct employees and we have a lot of secondary, you know, employees and vendors that we work with.

Gary Pinkerton 9:55
Okay, and so you list your stuff on several different websites. I’m sure the rbo and Airbnb and things like that, right?

Steve Schwab 10:02
Yeah. So on a side business, we couldn’t find a way to list our properties on all these different channels and operate the company the way we thought it should. So me and one of my competitors started a software company, a software company distributes that on to about over 200 different channels. So it’s not just my website, but it’s also these other 200 vrb o homeaway booking.com. So if you book on one that I met the blossom on the other real time bookings, that’s a whole side business. But yeah, we do we advertise No.

Gary Pinkerton 10:30
So I have a short term rental vacation rental, I guess, in St. Augustine beach, in Florida, and I think my manager right now is doing a tremendous job, but I think she’s doing them all manually. It kept showing in the calendar that it was an owner hold for owners use. And finally I was like, why do you have that down there for like three weeks over the next two months? I’m not planning to use this property. And she says, Oh no, that’s because Airbnb I want to say it is doesn’t share with you or something like that. So she has to manually do I don’t remember what it was, but it sounds like she’s not using your software.

Steve Schwab 11:06
Send her my way. Okay,

Gary Pinkerton 11:08
love to do that. Okay, so we talked about, you know, kind of the transition out of the military, you’re obviously using some skills of managing a very large organization. What role do you feel? I mean, I realize you’re the owner of the company, do you feel like a CEO role? Are you daily involved in operations?

Steve Schwab 11:25
You know, I’m just transitioning now into really trying to get away from operations. I’ve hired a chief Operations Officer, trying to move more into that CEO role where I’ve been kind of doing both. When you grow something, it was really hard to let go those details because yeah, yeah, you know, that trust factor. So selecting the right person was important, but now I’m moving on to, hopefully fulfilling my role that I should be doing as CEO.

Gary Pinkerton 11:48
And are you looking to expand the business or what’s the CEOs got for vision here,

Steve Schwab 11:52
it’s really stepping out and being able to be the face of the company instead of being internally looking at the day to day You know, why was this broken? or What happened here? Sure, being able to go out and put that forward facing presentation on to grow the company.

Gary Pinkerton 12:08
Cool. So I did my due diligence of stalking you. on your website, I noticed that we were predominantly in Mexico in the western side of the us a little bit there in Arizona. Nothing on the East Coast, or at least nothing I saw is an intentional Is that helpful? Is it more efficient doing it that way?

Steve Schwab 12:26
The center of gravity for me was a little town called Portland jasco. That’s where I got my start. So I’ve grown out from there. And I think it really comes down to just proximity, trying to operate something in Florida. You know, when we are only on the western side, United States will be difficult, right? So we’re taking steps to grow outward geographically, as we find the right opportunities and the right cities. We plan on growing out throughout the entire United States. I’m looking to go to 40 cities with controlled growth and no venture capital. There again, you know, making sure that we have operational control and proximity to the city. We’re working in is important to us.

Gary Pinkerton 13:02
So when you talk to people about hey, how is it? You know, I’m sure you get the question often How is it different having a short term rental in my portfolio than an annual rental or a long term residential rental property? Well, how do you address that? Or what were kind of the bigger points, there’s some

Steve Schwab 13:17
important things to know when you’re getting into the vacation world or the short term property. world. You know, first of all, if you’re counting on the rental income to make the mortgage, you have to plan ahead because there’s a reason why they call it seasonal rentals, because there’s a good season and there’s not a good season. So ensuring that your seasonality and your seasonality income isn’t going to affect your ability to keep up with your payments is isn’t first one of the most important things to look at. So cash flow is key. Make sure that the local ordinances the city and county are friendly to short term rentals. It was important. For instance, in Santa Barbara, they said okay, from now on, no more no rentals less than 30 days. So there A lot of people who bought very expensive homes, they’re planning on doing two and three night rentals. And suddenly they were, they had to change their plans. So you know, make sure those those ordinances are important. Make sure that you’re buying a property. If it has an HOA, check those CCN ours and make sure that those cc NARS don’t restrict your ability to do Vacation Rentals in the way that you see fit. Very important in there. But those are some things to think about. You also think about the length of season, there’s some places that have very long seasons, and some places have very short seasons, making sure that you know, if you have a longer season and a higher average daily rate is going to have a lot better income, you know, checking those sort of things important.

Gary Pinkerton 14:38
Yeah, very good. Very good advice. I learned that my first few months. The first one that you mentioned about having a little bit larger contingency and a little bit larger bank account in that property mean we were just ours opened up in high season and so for like six or seven months, man it was just rockin I was like, gosh, why didn’t I do this before this cash flow is amazing. But now I’m like I think I need Put some money back in that I say.

Steve Schwab 15:02
Yeah, yeah. Yeah. Make sure to budget accordingly. So support, right.

Gary Pinkerton 15:06
Yeah, that’s a great point. Okay. So let’s think about what would you say are benefits for somebody who’s not been following the traditional path of let’s say, putting their money in the Thrift Savings Plan or, or 401k, or typical 403 b kind of government plan for the first responders? How would you compare rental property ownership or maybe, you know, a small operating business, as opposed to more of a typical approach for retirement saving?

Steve Schwab 15:35
Well, you know, anytime you’re operating a small business, your ability for return on investments high, you know, take going out and taking that risk, you can create a lot of income for yourself, but remember, that’s an active investment as opposed to a you know, a passive income, right? time commitment is important. Making sure that you have the time and that’s who you’re married to, is one let you have that time so you’re not creating some sort of instability within your own family. So just a passive income when you’re retired. So a lot of it is about what you will get out of it. When it comes to just looking at maybe, you know, purchasing a seasonal rental. The great thing about that, especially if you know, if you’re very family centric, you can have investments, but also at times of the year you can go to enjoy your investment. We have different kinds of investors into vacation rentals, I consider them to be like a lifestyle investor, people who bought with the idea of being able to invest in real estate, but also maybe be able to enjoy a vacation destination that they love. We have a lot of people who are who bought while they were active or while they were in their career with the idea that this is someone that they love, you know, it’s a destination they love and they’re helping, they’re using that rental income to help pay that off. So that will become eventually become where they plan to retire, you know, on the beach or the mountains or you know, one of these types of destinations. It becomes a an investment into their future and into the family.

Gary Pinkerton 16:58
Great forward looking out. Have planning for what it’s going to look like, you know, down the road for your for your retirement future. I have about financing How have you purchased your your portfolio, your properties, any insights on on that, you know, paying cash financing with conventional loans, that kind of thing?

Steve Schwab 17:15
Well, I’ve done them all. I’ve gone everywhere from just a conventional loan to paying cash. And in Mexico, there’s tends to be a lot of developer financing, especially in the northern part of Mexico on the beach. So a lot of times, you know, in Mexico, there’s almost like a no qualifying down qualifying finance from the developer, you know, with like, 30% down depending what they do. There’s all those types of things, I would tell you that if you can afford to pay it off in 10 years, with the cash flow you have already, vacation roles may be a difficult thing for you, because if you don’t want to do a 30 year loan on a vacation rental, and then be struggling to make the payments if your cash flows in there for you during the offseason. So, make sure that when you make these decisions, you’re making good decisions based on where you’re at now, not the dream of what some real estate agent will tell you that this thing is going to book, you know, 365 days a year and 1000 bucks a night and it’s going to make you wealthy. Check the statistics that the real estate agent tells you against the market, you can go look at, you know, go look at their BM B’s and the VR videos, go talk to property managers about light homes that are like that, get statistics, compare them, you see what they’re charging and make sure that what you’re getting into is realistic for you. Yeah,

Gary Pinkerton 18:30
great. Definitely doing due diligence on the start. You mentioned, you don’t want to be covering the 30 year mortgage in an off season. I mean, a 10 year mortgage would be more difficult to cover. But are you saying are you talking about like down the road when you’re retired and you don’t have your other income? So what

Steve Schwab 18:45
is it okay, if you’re kind of cash flow is already struggling now, do you really want to try to figure out how you’re going to make that same payment when you’re retired. That might not be the best play for you, you know your your situation better than anybody else. You’re going to make those decisions. But a lot of times you look at the what you can afford on a 30 year note sort of a 10 year note like you can afford so much more. You know, be careful not to fall for that trap.

Gary Pinkerton 19:07
Yeah, yeah. Yeah. Got it. That makes total sense. Okay, so well, gosh, we flew through 20 minutes there. And I know we both were a little bit time limited. Any advice on how to study this industry, any resources that you would recommend for the listeners and then also, please don’t forget to put in maybe how they can find out more about you or contact you?

Steve Schwab 19:27
Well, you know, for your listeners, I have a book called going from a vacation renter to vacation homeowner, it’s on Amazon. But if they’ll email me personally, I’ll send them a copy of it. For all the first responders and military people out there listening to your podcast so they can go through and read it. It talks really about the same things we’re talking about here, but much more in depth, how to select a property one of the things you should be considering what’s going to read more often what’s going to fit your lifestyle. So I’m happy to send that out and they can just email me at [email protected] that’s Ca go.com I’d be happy to send that to them to help help them all out.

Gary Pinkerton 20:04
Okay, great. Well, I just sent you an email.

Steve Schwab 20:07
You got it?

Gary Pinkerton 20:09
Well, hey, Steve, thanks so much. And I’ve [email protected] And there’s a tremendous amount of information on there. And you can just kind of get a real good feel about where Steve has his properties. And you know how they set them up really nicely to show very well on the website. I learned a lot just by going through there and kind of comparing it to what I’m doing out in Florida. So really appreciate that resource and the app, the offer for that book is really, really gracious of you, Steve, what else have we not mentioned that we ought to talk about to this audience?

Steve Schwab 20:39
Well, I would tell you that if you’re going to go ahead and get into this industry, make sure to be a responsible host. Make sure to check the people that are coming through your property. Make sure to pick a good property manager that cares and treat your property like their own, that they’d be that there’s somebody that’s truly a steward of your property and advocates for you and your absence. Getting into it. It’s easy, but as we all know, running the operation becomes difficult part. So make sure that you’re making good choices once you’ve purchased that property on who stays your property and to make sure that your property is being well taken care of. Awesome.

Gary Pinkerton 21:12
Yeah. Have a good staff and a staff. It’s very in your customers nice as well. Right. Awesome. See, thank you so much for spending a few minutes with Eric investing audience today.

Steve Schwab 21:23
I really appreciate it. Thanks for your time.

Announcer 21:27
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