Don’t do arbitrage deals. Real estate arbitrage occurs when an investor ‘sells low and buys high,’ but does so in a matter of days or weeks, often times not even exchanging money for the sale until they have the buyer ready. This is often a make-money-fast strategy that isn’t sustainable, and doesn’t provide any real value in the market.
As a part of my series about the ‘Five Things You Need To Know To Succeed In The Real Estate Industry’, I had the pleasure of interviewing Emir Dukic.
Emir is the CEO of Rabbu, a turnkey platform for Real Estate investors looking to buy properties as short-term rentals.
Thank you so much for doing this with us! Can you tell us the backstory about what brought you to the Real Estate industry?
When we first moved to our neighborhood in Charlotte, my wife and I purchased a home with a 200 square foot room above our detached garage. We had all the space we needed, so we decided to turn that room into an Airbnb offering. We equipped it with the amenities we thought a traveler might want, and made it aesthetically appealing based on the style we liked and the neighborhood we lived in. When we listed the space, we were shocked — the interest was quick and the demand was sustainable. The success of that over-garage rental was the beginning of Rabbu; we’ve been helping investors understand and capitalize on that demand ever since.
Can you share the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?
That initial Airbnb rental covered the mortgage on our entire home, which was in a highly desirable neighborhood in Charlotte. For my wife and I, that was life changing. We had low expectations; we were just hoping to translate an unused space into some extra discretionary income. But the impact of having that one decision take the place of all of our mortgage payments was one we couldn’t ignore. We quickly realized that real estate was full of those life changing opportunities, not just for us but for other prospective owners and people in our position.
Do you have a favorite “life lesson quote”? Can you share a story or example of how that was relevant to you in your life?
‘You don’t have to see the whole staircase, you just have to take the first step.’ In my professional and startup career, I’ve seen people wait for the perfect opportunity to take the leap. There’s this instinct that the whole process needs to be in full view, with a plan that makes sense, financials that balance, and with all potential caveats accounted for. Honestly, I’ve never seen any worthwhile venture go as planned. Setbacks and opportunities come and go along the way, none of which are visible or predictable at the beginning. I find the most important thing is to start doing — to take those first steps and keep going at that pace. Once you take one step forward, you’ll see the next one (if it’s there) — this process repeats and soon, you’ve gotten somewhere.
Are you working on any exciting new projects now? How do you think that will help people?
Our team is building a platform to allow investors to source and operate their short-term rentals, like Airbnbs, as a full-fledged investment strategy. We just launched our Zestimate equivalent for Airbnb Revenue Potential. This is a no-cost tool that lets anyone type in an address and understand in full the revenue potential of their property. It takes seconds, and it includes a full overview of how nearby properties are performing, complete with pictures, nightly rates, and calendars. The first question every owner has is ‘how much could my property make?’ This tool is designed to give a detailed answer instantly — one that’s backed by real-time data and highly developed algorithms. We want to bring more transparency to the market, we think knowledge in the market should be both fast and free.
What do you think makes your company stand out? Can you share a story?
Housing has been the best investment in the world for the past century. Vacation rentals have been part of that equation, but they’ve traditionally functioned as second homes that owners use as vacation rentals to offset their liabilities. But the work-from-anywhere culture, which comes at a time where the housing market continues to increase in price, has created a surge of demand for short term rentals. Supply is lagging behind; Airbnb has predicted that they’ll need over a million more hosts to fulfill the demand in the market. We have created a platform for investors to capture that demand, and to actually utilize the power of the short-term rental strategy as a pillar of their portfolio. They can acquire properties that make double digit returns without losing time or mental energy to the management of their properties. Throughout the pandemic, our investors have seen returns that are 60% higher than the traditional marketplace.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
There are too many to count! A name that stays top of mind for me is Pete Campbell. He loves the value-add that our company has created, and he spent the last year or so educating our team on real estate investing. He’s helped us better understand the needs of our investors, and I think we’d be a very different company today if it wasn’t for his involvement. We continue to be grateful for the role he’s played.
Let’s now jump to the main core of our interview. Can you share 3 things that most excite you about the Real Estate industry? If you can please share a story or example.
1) COVID-19 accelerated major shifts in the way people live, work, and travel. Real estate will absorb the impact of that change, and I think we’ll see it transform at a faster pace over the short term than we’ve seen in a very long time. With a novel freedom from office, people can live anywhere. Being in a different location is no longer synonymous with taking the day off from work. As a result, people are adopting a more nomadic lifestyle. The uncertainty of the pandemic will be long-lasting, as will the new liberty of location that remote work has introduced. More than anything, people need landlords who think monthly instead of annually, and who are happy to accommodate month-to-month arrangements.
2) Hospitality has changed, and hotels are suffering. With ongoing restrictions on global travel, businesses in the hospitality space were dependent on local travel. But demand has shifted farther away from traditional accommodations. Travelers feel safer in properties with more privacy, space, and room. While that’s made for a hard few months, change is an exciting force that’s shifting the industry. Frontier hoteliers are converting their spaces into micro-apartments. They’re removing their front desk, and offering a more personalized, more spacious experience for short-term tenants. I think the sky will be the limit here, and the next 20 years of travel could look very different than anyone expected.
3) Demand for Airbnb style homes is off the charts. Airbnb experts have been watching the market for a long time, and their projected need for 1 million hosts carries real credibility. Short term rentals made up 41% of the total market share for travel lodging last year, and 65% of those Airbnb rentals are in multifamily buildings. Not only will this shape the market, it also provides owners or beginning investors with a really exciting opportunity to enter a market with high returns and low volatility. Anyone with an address has what they need to begin.
Can you share 3 things that most concern you about the industry? If you had the ability to implement 3 ways to reform or improve the industry, what would you suggest? Please share stories or examples if possible.
- There’s a misconception in the industry that short-term rentals are only in vacation markets. Far from the truth, that’s a misguided belief that can deter or misinform investors who could be capitalizing on the demand in first, second, and third tier cities. Often, those markets have some of the best performing units.
- I think regulation is a space that could use a lot of re-imagination. Laws, licenses, and underwriting protocols make it hard for investors and owners to operate at a pace that allows them to capitalize on the excess yield in the market. New vendors are developing solutions, and I think the industry will move toward much more agile operations as a whole.
- Another area that’s ripe for transformation are home owners associations (HOAs). Conceptually, they have something to offer. But poorly managed HOAs can make the homeownership experience miserable. Restrictions and costs are rarely justified by the services provided, and the HOA model isn’t fit for the flexible format the sector is moving toward.
What advice would you give to other real estate leaders to help their teams to thrive and to create a really fantastic work culture?
The best thing I could tell real estate team leaders would be to over-communicate. Things are changing quickly and their teams are working hard; it’s worth taking the time to connect, repeat, and double check. Over-communication is an asset in every direction, from day-to-day tasks to employee recognition. And this will trickle through the company culture, helping team members in their client interactions.
I’d also recommend that real estate leaders be as transparent as possible from the beginning. That’s a pillar of corporate culture for which employees have a keen sense; I don’t think leaders can afford to get that one wrong. Finally, advice I’m always thankful to have received is to create owners and appoint ‘CEOs’ for individual tasks and projects. That’s a strategy that’s made our team really agile, and it’s allowed our team members to contribute at their highest potential.
If you had to advise someone about 5 non intuitive things one should know to succeed in the Real Estate industry, what would you say? Can you please give a story or an example for each?
- Join Facebook groups. This is a simple starting point every investor should consider. You’ll be amazed at the kind of community that is literally clicks away.
- Find a mentor. Too many people think about this as an early-career strategy. You’re never too old or too experienced to have a valued mentor in your life. Sometimes great relationships happen naturally, but more often this takes a concentrated effort — and it’s an effort always worth making, in my experience.
- Start small. There is a lot of learning involved in real estate investing. Investors should start small with hands-on ownership projects and earn those lessons as they go. Investing in multiple properties can still be the goal, but it’s worth your time to start with a manageable test run and gain more insights as you progress.
- Look into fractional ownership. The age-old maxim that’s passed around to every investor is not to venture more than you can stand to lose. There’s truth in that for the real estate industry, too. Fractional ownership makes it easier for investors to participate in the market — they get every real-life lesson while still being able to stick to an amount that they can manage.
- Don’t do arbitrage deals. Real estate arbitrage occurs when an investor ‘sells low and buys high,’ but does so in a matter of days or weeks, often times not even exchanging money for the sale until they have the buyer ready. This is often a make-money-fast strategy that isn’t sustainable, and doesn’t provide any real value in the market. It’s a much better approach to invest in a community, and to make sure your portfolio is serving other purposes rather than just creating a price hike.
You are a person of influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be?
People need to think about non-traditional ways to achieve homeownership. Today, there are more programs and strategies (like short-term rentals) than we could have imagined, and they’re making homeownership much more attainable. As we recover from a global crisis, homeownership can provide security and freedom in more ways than what can show up on a balance sheet; I want prospective buyers and young families to know it doesn’t need to be as far away as it might seem.
How can our readers further follow your work online?
Thank you for your time, and your excellent insights! We wish you continued success.