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What if you could get more of what you want in life? But not through pushing, forcing, or pressure.
You can.
When it comes to money, time, and energy, no one’s gonna turn away more.
And Kate Northrup, Bestselling Author of Money: A Love Story and Do Less and host of Plenty, is here to help you expand your capacity to receive all of the best.
As a Money Empowerment OG who’s been at it for nearly 2 decades, Kate’s the abundance-oriented best friend you may not even know you’ve always needed.
Pull up a chair every week with top thought leaders, luminaries, and adventurers to learn how to have more abundance with ease.
So we have our first Airbnb. It's already making us money, which is so great. All that being said, we went into it thinking it was gonna cost about half as much as it did to renovate.
Kate Northrup:Welcome to Plenty, a weekly recalibration of power, money, and safety for high capacity humans. I'm Kate Northrup, best selling author and creator of Relaxed Money, and this is where neuroscience meets ancient wisdom meets real wealth strategy. This is the sacred conversation at the intersection of money, the body, and the life you're truly here to live. If you're ready to reimagine what's possible for yourself and for the world, you're in the right place. Let's go.
Kate Northrup:Hi, honey. Welcome back.
Mike Watts:Hi.
Kate Northrup:Welcome back to the show. Love having you here.
Mike Watts:Thank you.
Kate Northrup:You're a fan favorite.
Mike Watts:Just, you know, disclaimer for anybody watching on video, we're in a very tight time crunch, so we set up one camera.
Kate Northrup:Nobody.
Mike Watts:Instead of a three camera setup. Okay. Just in case they were concerned, which I know they're not. The
Kate Northrup:vast majority of our people listen on audio. They can't even see us. But hey, shout out to our YouTube friends. And if you listen on audio and you didn't know that we do a full production on YouTube, it's gorgeous. You know, you can always catch us on YouTube also.
Kate Northrup:Okay. Links are in the show notes
Mike Watts:for
Kate Northrup:We
Mike Watts:are back into the chairs that are too small for people that are six foot. So we are here. You
Kate Northrup:could be six feet with a narrow back and shoulders.
Mike Watts:I lied.
Kate Northrup:I'm not able to
Mike Watts:be six feet.
Kate Northrup:Well, you're five eleven and three quarters, so it's fine. Okay. We're talking about our recent launch of something brand new that we have been doing behind the scenes, that you have been doing, I should say, behind the scenes, that is very, very exciting.
Mike Watts:I Where are the scenes?
Kate Northrup:Like, we haven't been talking about it. I haven't talked about it in the podcast. I haven't talked about it on social media particularly. I haven't talked about it via email. So, like, you have to know us to know that this is happening.
Kate Northrup:But it is it is time for us to finally go public about this project.
Mike Watts:Jeff, are.
Kate Northrup:I've been trying to talk about it.
Mike Watts:Funny question.
Kate Northrup:I've been trying to talk about it the whole time, but you keep being like, we're not ready yet. So Well,
Mike Watts:you can talk about it. We're just not Yeah. Well, there's it's like, why talk about something that's not ready? It's still in process.
Kate Northrup:Because people like to come on the journey with you, but we're still very much on the journey. So do you wanna share our news? No. I you can reveal it.
Mike Watts:This is your moment that you have been waiting for for so long. So
Kate Northrup:Mike and I started our short term rental business. So we have our first Airbnb, our first what do they call it? Door under. What do they call it's like a don't isn't there like a phrase in the short term rental?
Mike Watts:It's like how many well, it's just in general real estate, the converse it's like how many doors do you have?
Kate Northrup:How many doors? So now we we have what?
Mike Watts:We have have land in Arizona. So anybody's if looking for land, we can figure something out over there.
Kate Northrup:Okay.
Mike Watts:No doors. No doors. And then we did invest in like a commercial real estate fund. So we have It's completely
Kate Northrup:passive, though. We're not
Mike Watts:We don't do anything there. No. And then now we have one active door.
Kate Northrup:One active door. And so it is a short term rental in Yarmouth, Maine. It is a beautifully renovated five bedroom cape cod. A his Yes. A classic New England cape.
Kate Northrup:It is precious. And we're gonna take
Mike Watts:By you the time this comes out, it will have, as Kate said yesterday, a feminine touch. Because the design wasn't doesn't have the feminine touch.
Kate Northrup:No. Actually, think the design is phenomenal. It just needs a few zhuzhuzh, and by the time this episode is out, it will have the zhuzhuzh, meaning some throw pillows, all the stuff that men generally, this is a vast over oversimplification.
Mike Watts:But What yourself?
Kate Northrup:In general, I'll just say you, that you aren't
Mike Watts:Gentlemen, let's cancel her
Kate Northrup:right now. You aren't always one who's gonna look at a rumble and be like, oh, this could use these decor jujas. You do the big things, which is great, and then I'm coming in and adding some flair.
Mike Watts:So With the final with the level of stress that comes with it.
Kate Northrup:We launched this thing. It went live during our Good With Money workshop, during our Relax Money enrollment, which was kind of fun. Why not? Mhmm. Lead a workshop for 31,000 people.
Kate Northrup:This was also part one, by
Mike Watts:the way. Should tell them that.
Kate Northrup:Oh, yeah. Is part one. Part one is, like, how we got started, why we're doing this, how we chose the property, what are our goals. And the reason we're sharing this with you is we know that we have other people in this community who are interested in building multiple streams of income, interested in building assets that cash flow, that grow in value, and also interested in tax saving strategies. So, you know, headline, Mike and I are new at this.
Kate Northrup:So we are sharing very much the messy details, the lessons we've learned the hard way, and hopefully, it'll help you as well if you also are looking at diversifying your income streams. And if you're into real estate, which we always have been, I've always known this was gonna be something I would be into. In fact, I actually did a independent study in college. Do you know this? No.
Kate Northrup:I had this professor, professor Joseph Mittleman. He was amazing. Not only was he a professor at Brown, he was also a real estate investor in New York City. And he and I and this other kid, I can't remember this guy's name, did this real estate investing independent study. And I learned so much about REITs and all this different stuff and then, you know, never did anything with it.
Kate Northrup:But here we are now, twenty years later, and we are getting our portfolio going with real estate. Well, we've been invested for a few years with this self focused
Mike Watts:off. Self managed. If you're looking at something like this, there's a couple ways to start that I have learned in this process, so we can dive deeper. But if you want to do real estate or any other type of investment in in from that standpoint, that doesn't make any sense. But that's a phrase that I say a lot, which means
Kate Northrup:You like to add in. Okay. Not gonna talk about it. Let's just stand on the there. You like to throw in that's there.
Mike Watts:Alright. Here we go. Well, we also have a a thing of like going through the family. So everyone is saying
Kate Northrup:Actually, had a dream about that last night.
Mike Watts:Everyone is using the word like way too much. Filler words. That's where
Kate Northrup:we're That's practice in this podcast reducing our filler words.
Mike Watts:Yes. So you can either people phrase it to me this way in term for this real estate project. You have either more money, less time. Maybe you have money and time depending on your situation, or maybe that you have more time and less money. If you fit into one of those three buckets, you can go find projects.
Mike Watts:So if you have more money, less time, you can get a real estate, let's say a house. I'm just gonna use a single family house as an example. And then you could have somebody else manage it. You could be a manager of properties and use other people's capital. So there's always people that have
Kate Northrup:actually kept it. Less money.
Mike Watts:Right. That don't wanna manage a project, but they'd be willing to invest in something. So you could partner with an investor that exists. And then maybe you have more money and more time, and then you could actually manage the whole thing yourself.
Kate Northrup:Like mister Mike Watts.
Mike Watts:Yeah.
Kate Northrup:So much money, so much time.
Mike Watts:I don't know about that. But
Kate Northrup:but it is kids. We're gonna talk about how even with not a lot of time, and, you know, we certainly had capital to invest, but we also got creative. So we'll tell you about that. Some of it, we'll tell you about today, and and then we're gonna give actual numbers and figures in part two.
Mike Watts:Correct. So you just look at what and we've both been interested in getting involved in real estate. And should we just tell them how this came about? Yeah. So we were looking at paying our tax number.
Mike Watts:What then I became obsessed with paying a little bit less in taxes. So what are the strategies we can do to pay less in taxes? So then across the Internet, there were these tax strategists that became a thing. And it's still a thing, and it's out there. So then I researched, like, five or six different tax strategists, talked to a bunch of people, got on their calls, got on their team.
Mike Watts:I was like, okay. Here. Here's what they're doing. What are they doing? Why are they doing it?
Mike Watts:What's the recommendations? One of the the simplest ways to reduce taxes is to have a short term rental property. But now every decision that you make comes with other complications. Right? So yes, you can save money on taxes, but then you might have to run an Airbnb project now.
Mike Watts:Right? So that adds level of complexity to your life in this world. So we wanted I was like, okay. And then what happened was so that we were thinking about this a lot. And then last summer, we went back to Yarmouth for the classic clam fest weekend that takes place in Yarmouth, Maine.
Kate Northrup:If anybody's ever been to the clam festival, please send me a d m on Instagram. I wanna know how your experience was.
Mike Watts:K. So then we left, and Kate and I were kinda in this because we were like looking at getting a real estate, but we were in there was a lot happening in our life about leaving Miami, moving to Tennessee. And we stayed at this house that was a two bedroom, one bath, thousand square feet maybe?
Kate Northrup:Maybe.
Mike Watts:Maybe. Person who owned it split it into you could rent the left side of the ranch and the right side of the ranch. Each of them were pretty much identical. Two bedroom, one bath. Maybe the whole house was if you and so if you had needed four bedrooms, you can combine the unit.
Mike Watts:But we left and we're driving down to our friend's house in Connecticut, and I said, how much did we even pay for that thing? Because Kate booked the Airbnb. And she looked it up. And
Kate Northrup:We had paid basically for this tiny place. It was like the you know, it was done. It great. Fine. Like, yeah.
Kate Northrup:It was fine.
Mike Watts:No frills. It. It was very simple.
Kate Northrup:Was very Clean. Basic.
Mike Watts:Yeah. Clean.
Kate Northrup:Cute. Yeah. Clean and cute. No frills, though. We had paid $680 a night for that.
Kate Northrup:And we were That included
Mike Watts:fees, taxes, everything. So all in.
Kate Northrup:And we were there for five or six nights. And we just looked at each other, because I had booked it, but hadn't fully, you know, like I hadn't fully received what we were paying for it. And then when we checked out and Mike said that, we were driving away from the Airbnb on the very same street that the Airbnb was on as he was asking me this question. My back had gone out. I was also walking like I was
Mike Watts:Oh, yeah. I forgot about that.
Kate Northrup:On the verge of death. So, you know, it's a whole thing. Yeah. And we saw, as we drove out, like, probably six houses down. There's, like, six houses down from the Airbnb, we saw a cute little cape with a for sale sign.
Kate Northrup:And so we got this idea, maybe we could have an Airbnb. Also, the other part of the story that I don't know if you remember is that we were down the street. So we bought this Airbnb in the neighborhood next door to the neighborhood we had built a house in
Mike Watts:Yes.
Kate Northrup:That Mike and I thought or I'll speak for myself. I thought we were going to raise our kids in until they graduated from high school. In the end, we needed to leave Maine for a variety of reasons. So we left in 2021. We sold that house, but we still have a lot of friends in the neighborhood.
Kate Northrup:So we were with them on one of their porches, and our old neighbors were trying to convince us about why we needed to buy a house in that neighborhood. Do you remember this?
Mike Watts:Yes. I remember.
Kate Northrup:They were trying Well, that's how this whole thing That's how this whole thing went. So this had been probably two days before the whole, you know, our whole community there was trying to convince us that we should buy a house in that same neighborhood and just use it only in the summer Mhmm. But rent it out the rest of the year or something something whatever. One of the
Mike Watts:rent one of the people that lived in that neighborhood were moving. And so when their house was coming up on the market, they were like, you should just buy that.
Kate Northrup:They were like, the Watts should buy this house and be our neighbors part time again.
Mike Watts:Right. And then the whole discussion turned into, okay, we rent it out in the summer, and then people can stay there for the school year because then they can come for nine months. This is this whole stuff started to happen.
Kate Northrup:Yes. So, also, I think an important piece of this because one of my girlfriends left me a voice memo asking me all these questions about our short term rental business, which was the perfect tee up to this episode. I was like, girl, I've got you. This episode comes out in a week. I will record it for you.
Kate Northrup:So you know who you are. You're listening right now. But the question really was, how did you decide on this property? And so it's important to know that this is the town I grew up in. I know this town so well.
Kate Northrup:It's a small town of 9,000 on the coast of Maine. It's probably a little bigger now, but it was about 9,000 when I grew up was growing up. It has the number one school system in the state. It's coastal. It's got a cozy Main Street.
Kate Northrup:It's got the clam festival. It has, like, all the the classic, like, middle of the town library, beautiful park with a river. It's got the ocean. It has Casco Bay. It's, you know, fifteen, twenty minutes to Downtown Portland for all the incredible restaurants and, you know, the the boat scene and what those are the whole thing.
Kate Northrup:So we knew the market so well. There was just, like, all this embedded information. So we didn't have to do research about what's this town like? What are the rental rates gonna be like? What's the seasonality?
Kate Northrup:What's it like on the West Side of town versus the East Side of town? Will this part do well? I just knew all of that inherently, and I think that's an important piece of why we invested there.
Mike Watts:To add on, let's say you don't have a space like that, you know, a place like that. So research
Kate Northrup:How can this apply to you?
Mike Watts:Exactly. So it's where do you like to go is a good way. There's a couple things I've learned in this process. Most likely by the '26, we're gonna have one or two more properties in this world because this is something I wanna expand on.
Kate Northrup:And there's another story about that. That's a good one.
Mike Watts:Okay. So then how do you determine where to invest your money in these environments? Well, you could there's a web there's a bunch of websites, number one, that can help you. So airdna.com is one. There is bnbcalc.com, which is another one.
Mike Watts:It's also, like, where do you like to go? Where do you like
Kate Northrup:spend time? Newsletter was called that I was signed up for.
Mike Watts:S t r something. I don't know.
Kate Northrup:But I'm gonna find the link, we're gonna put it in the show notes.
Mike Watts:Yeah. But it's it's looking at what your market so if you're in Maine, there's a it's very seasonality. If you're in Florida, it's seasonality. You have wintertime is high, summertime now, right now coming into summer in The United States, very low. You know, it's like ghost town, people leave Florida and vice versa when the seasons switch.
Mike Watts:So you have to understand the market you're investing into. And if you don't want to work in your market, let's say you live in the middle of Iowa and you're you know there's not a
Kate Northrup:lot sports hot that Airbnb come It's not
Mike Watts:place. But you can research other places, and I've met a lot of people that have been doing this. They've never seen properties that they have purchased. So they are investors because they know the market is well, and they just buy these properties sight unseen situation. And then they set up the systems to get everything taken care of where you don't have to go there.
Mike Watts:And if you have like, we have one door. So it's our attention is on one door. If you're up to 20 doors, that's a different situation. And we have a friend that has four or five Airbnb's, but they're all in the same town. So if you can put them together, then you can have one cleaner do all the properties.
Mike Watts:It starts to expand from there. So if we were
Kate Northrup:to look at main,
Mike Watts:it has to make sense for what's available. So when we looked into the main house in our research, what is on the market now? And then I lever I use these websites to say what are we investing into? What makes the most sense? There's a lot of three bedroom Airbnb's available, but there's we ended up adding another bedroom to this house.
Mike Watts:So we took it from a four bedroom to a five bedroom, and so it's five bed, three baths. So we can accommodate up to 10 people. And then if you have babies, you there's a pack and play, so you can even fit 11 little with little humans. And if you have twins, you could put 12. Right?
Mike Watts:Little humans in a pack and play together. So it's like that increases the value. It increases the nightly rate. The average, they call it the ADR, the average daily rate can go higher because you have more bedrooms, and it's more of a unique property in that area.
Kate Northrup:To be clear, the for us to add a bedroom, this is where you wanna start to get creative when you look at spaces. And for the record, I still have not set foot inside this property. I only have seen it on FaceTime and in photos.
Mike Watts:Yeah.
Kate Northrup:But we saw with our agent who's in Maine, she also has Airbnb, so she knows the market well from an investor standpoint. She helped us look at the property and see possibilities. And immediately, what we saw is there was a room over the garage that was fully finished with a bathroom. It just didn't have a closet, and it didn't have a door. So you went upstairs, and there was no door.
Kate Northrup:So we added a door at the bottom of the stairs, and we added a closet, and that made it an instant bedroom. So it's not like we built out a whole new room, but we saw this space that it could easily be turned into a bedroom without a huge amount of extra work.
Mike Watts:Correct. And to define And that's
Kate Northrup:a huge increase in the ADR.
Mike Watts:Definition daily rate. We should define these terms before we start talking about So there's short term rentals, which is technically a house that is seven days on average and under stays. So treated more very much like a hotel. And then there's midterm rentals, which could be a month at a time. And then there's a long term rental.
Mike Watts:So if you sign a lease like the house we're recording in right now, we signed a lease for one year. And in terms of profitability, usually, how it rolls is long term rentals is more of a consistent income over time, so profitability is less. Midterm rental could be a little bit more, and then short term rentals is where you can make more money. Running a short term rental property has more complications because you have turnover very much like a hotel situation. So the way to look at an s they call it STR, short term rental, is you're running like a hotel.
Mike Watts:So we looked into different homes around the environment in around Yarmouth. First, we researched that house, and then we went in there and looked at what the possibilities were. We went under contract. Neither one of us actually set foot into it. And then during the inspection, I flew up there to actually look at the house.
Mike Watts:Because during the inspection time, you can always pull out if you want to. If you find something that's on the inspection is incorrect or something you don't wanna deal with, you could always leave. So we just went under contract and went and looked at the house. So that's how it got started. That's where our idea went.
Mike Watts:And then I did a comparison of homes that have sold versus homes on the market. I put it in Excel spreadsheet. I think a lot of this stuff can probably be done with websites now, AI part of or just websites in general, but I I started pulling things together. What I noticed is that Zillow is a little tricky for you. So what I did is I started because it'll say let's say you put a house on the market and take it off, and then it restarts the counter of when the day has been on the market.
Mike Watts:But let's say it was on the market ninety days beforehand, it'll just say it's been on the market for one day. So it pulls the most recent price. So it kinda tricks the system to say it's only been on the market one day. What I did when I looked at all this data, it was like, okay. This has actually been on the market for a hundred and ten days, but they pulled it off for ten, put it back on.
Mike Watts:So when I did all my calculations because what it does is it resets the listing price. So if I start at a million dollars, leave it on for three months, and then I lower it to 900,000, take it off the market for ten days, put it back on the market for 800,000, it'll say the starting point is 800,000. But in my Mike's brain, actually, the starting point was a million bucks.
Kate Northrup:And just for people who aren't tracking Yeah. Why are you doing that calculation?
Mike Watts:That's what I'm about to explain. So I wanted to see what was the listing price that was there, and then what is the price per square foot of what places have been are currently listed at and would have closed in the last six months. Because the real estate market has changed so much. You can't look at three years from now anymore to where it is today. And depending on where market you're in, you have to evaluate all these numbers.
Mike Watts:Right? And at least look at it. So what I was like, I noticed that the price per square foot of houses not on the water in Maine, because the houses on the water have a higher price per square foot, were around $431 per square foot is what the places were going for. Ours, we were getting it for $2.73. So I knew there was wiggle room in the price that we could put investment in and get our money back in theory.
Mike Watts:Right? All of this stuff is in theory. You never know what happens until the market tells you what it's evaluated the price is evaluated at. And so then I knew we were okay. We have wiggle room to invest money, and we'll talk more details about that on part two.
Mike Watts:But then we had a place because Kate has always been connected, and same with thing with our girls, to Maine. And I really like Maine, but I don't have the connection they have because they I wasn't born there. It's fun to go because we have a lot of friends, and it's fun to see people, and your parents are still there, etcetera. So this gave us a place to go to in Maine. We can rent it out when we're not there and we can have people like my mom likes to go to Maine with her friends so they have a place to go and stay.
Mike Watts:So it allows that experience to take place. But that gives us the why of what we were trying to do.
Kate Northrup:Yes. And so it started out because of tax savings, and then it turned into, oh, this would be cool to have for our family to go from time to time. But just to be clear, this is not a vacation home for
Mike Watts:us. Correct.
Kate Northrup:We bought it as an investment property. And in fact, because the summer months are our highest grossing months, we will likely not stay there or at least not for a very long because if we're staying there, we're essentially losing we're not losing money, but we are losing there's a big opportunity cost because we can make so much with this.
Mike Watts:It depends on what's going on. We're about to go there in a couple days because they're doing construction.
Kate Northrup:Right. So no one
Mike Watts:can stay there anymore. Construction, I'm not yeah. Exactly.
Kate Northrup:Exactly. Okay. So that was answering the question why this property, what should people be looking for. But I would say if there's an area that you have embedded knowledge and even insider knowledge in a way. I mean, I wouldn't call it insider knowledge in that it's hidden, the info I have on this town.
Kate Northrup:It's just you know, I just know it. Familiar. Yeah. And we know everybody in the town. So there's also it's very easy in terms of finding just a variety of people that you need for all the things.
Kate Northrup:And so, you know, my sister went over the other day and, like, unpacked a box and put the poofs in the living room, you know, stuff like that. So that was why this property, how we found it.
Mike Watts:Our next Disclosure in terms of your research is to make sure you pay attention to what the laws and rules are.
Kate Northrup:Oh, a 100%. Because the town we just bought a house in in Tennessee, it does not even allow short term rentals.
Mike Watts:Yeah. I don't think so. I have to actually look the rules up.
Kate Northrup:I don't think they do because every time I type in the town on Airbnb, there's nothing.
Mike Watts:I wanna actually clear on what it is. And then so if you bought a place in Portland, because I was looking at the house that Kate and I lived in when we got married, we were renting. It was a three unit, and we rented one of them. It came up for sale this summer or this winter. And I was like, that would be cool.
Mike Watts:It's like buy the house that we were in at that time. But Portland has rules where if you have three it's like under five or something, you can only short term rental one unit. There's can be able to do it. You just wanna make sure you follow you don't wanna go buy a property, invest in a property, and then you go look up the rules and what they're not gonna allow you to Exactly. So when you are in this research phase, just have it be fun.
Mike Watts:Because is really fun. But just also make sure you understand the rules and regulations of when you're getting into a spot.
Kate Northrup:A 100%. Okay. We're gonna get into all the figures next time, but it is important to know just high level on this property. We got it for a low price per square foot because the house needed a lot of work. And we knew that if we put in the work, we would increase the value significantly, at least theoretically.
Kate Northrup:So Uh-huh. That's an important piece. Now what ended up happening with this particular property is once we got in there
Mike Watts:We made first timer mistakes.
Kate Northrup:There was and so we're telling you all of this not in terms of, like, do as I do. We're telling you all of this in terms of we're still thrilled with the investment. It's already making us money, which is so great, and it's only been listed like a week and a half. The tax savings this year will be significant, and we can talk a little bit about why. And long term, the property already has appreciated in value significantly.
Kate Northrup:And if we wanted to turn around and sell it, you know, we could. And then also with the cash flow, it's really good in terms of just the difference between our operating costs and what we can what we can make for our rental rates. All that being said, we went into it thinking it was gonna cost about half as much as it did to renovate. So Mhmm. We ended up buying it for getting a really good deal on the property.
Kate Northrup:And then once you got in there, Mike, what did you find out when you got in there with the contractor? We it was just
Mike Watts:it was in worse shape than we expected. And I took two contractors through, two or three. And number one thing I recommend to people doing any type of work on their house is you need a minimum of two to three quotes from a variety of different subcontractors. Even if it's HVAC guys. Even if it's the you just get more quotes.
Kate Northrup:Well, would say three quotes is the same thing we have a rule in our company. We do not hire anyone for any position unless we have Yes. Interviewed a minimum of three people.
Mike Watts:And there is because the pricing is example, I'll just give you one tidbit. There is a new rule that passed in the state of Maine. Maine's, for some reason, keeps following California and New York. All the rules they roll out in Maine and New York state, Maine is like, we're gonna do that too. To me, I don't know why.
Mike Watts:It doesn't make any sense, but California has fires, forest fires. They have a rule that you have to put a indoor sprinkler system in your house. For some reason, Maine is like, we should do that too. So they this was something I learned after the fact we closed. If you remove 50% of your drywall inside, you have to install a residential sprinkler system.
Mike Watts:I'll just I got four sprinkler system quotes. They range from $15,000 to $33,000 for the same thing. And so I was like, okay. That is just one example of why you get and then I got who referred those to me also takes high priority of where those referrals came from
Kate Northrup:Mhmm.
Mike Watts:For also. So that is just one example of getting multiple quotes. Even in your primary residence where you live now is do the same thing.
Kate Northrup:A 100%. When you got in there, it was in worse shape than you thought. Yeah. I was getting there. Oh, okay.
Mike Watts:Yeah. But go ahead. I called you.
Kate Northrup:Well, you called me from Maine, and you were basically like, so I'm here, and basically I at far like we just thought we were gonna take down this one wall between the living room and the kitchen. Yeah. We knew we were gonna redo all the bathrooms. We knew we were gonna redo the kitchen.
Mike Watts:Yes. But
Kate Northrup:that's kind of what we thought we were gonna do, was just those The
Mike Watts:garage had mice poop everywhere. There was rodent poop. Their basement had some mold because they had water leakage coming through the bulkhead. The bulkhead is a hole on your house that you get down underneath. And so I saw those, and I saw where the problem was, and we walked through with contract, and he's like, yeah.
Mike Watts:That's a problem. So we had, in our closing, the seller paid for us to do that work. So they took down the wall, like Kate was talking about, to open up the space between the kitchen and labor room, and they cleared all the mold out that was there. And they gutted the basement, and they gutted the garage. And the garage is where the rodents were and all this all that was done.
Mike Watts:And I walked through the house after they did the gut of what they were doing, and I was like, this is still off. Something is still wrong here. And that's when I called Kate. Was like, we have to gut the rest of the house, and that's the only way this is gonna work. And then once we gut the rest of the house, it's like, what else do we wanna do when we're in this state because we never are gonna experience this again.
Mike Watts:Knock on wood. To
Kate Northrup:And to gut a house means Means. In this case.
Mike Watts:Take in the Mike's definition of gut is you remove all the drywall or plaster. These walls were plaster. This is a 1957 house. And then they added a garage. So the original house was a four it was actually a now that I think about it, it was the original house was actually four bedroom two bath.
Mike Watts:Yep. So it was a cape, and then they added a garage and a space above the garage and a little hallway connecting those two. So the way I treated this home was it was two separate living spaces because the connection from the main house to the garage spot was a little challenging. So we had to treat it as two separate units even though they were all connected. And so the main spot of the the main house was we took everything down to the studs.
Mike Watts:So we removed the plaster. We got rid of all the insulation. And then once we ripped all that out, we realized how out of date the electrical lines were and how out of date the plumbing was. They had a cast iron pipes coming in that were eroded out, so we had to cut everything out. So essentially, we had to replumb and run all brand new electrical wires throughout the entire house.
Kate Northrup:Got it. And yeah. So all of that cost us twice the amount.
Mike Watts:Well, there's way more than that, but go ahead.
Kate Northrup:Yeah. But we don't need to I don't really wanna like itemize every single thing
Mike Watts:we did. We should do it.
Kate Northrup:I think
Mike Watts:I mean, it's a discovery.
Kate Northrup:Just see you using too much information for the average listener.
Mike Watts:We have very smart listeners that can handle a lot. Their capacity is amazing. We don't have to list it all today, but it was just cool because they had a the house used to be a coal run furnace. So back in the day, they used to have a spot where they would dump coal in from the street, put it in this box, and then the furnace was still in the ground where the base was, and that's how the house would heat up. Of course, they've moved on to oil at that time, but the base for where the coal furnace was was still there, and the coal box was there.
Mike Watts:My inspector said he hasn't seen a coal box in a house in twenty years.
Kate Northrup:Wow.
Mike Watts:And of course we got rid of all of that and then sterilized the whole thing downstairs. So but yeah. It was just when you get into this home, it's super funky. You know, you just never know what you're gonna discover when you tear apart a house.
Kate Northrup:Totally. So that you also had wanted we closed on the house when?
Mike Watts:We closed 10/09/2020
Kate Northrup:you had a goal to get it up and running by
Mike Watts:By the
Kate Northrup:end of the year. Christmas.
Mike Watts:Yeah. Yeah. On Christmas renters.
Kate Northrup:You wanted Christmas renters because we were trying to get it on our 2025 taxes.
Mike Watts:Yeah. And the reason I did that well, first off, it was the first time I ever did a project like this that turned into something much bigger than I thought. We got it up. It took us instead of three months, it took us or Six. Two and a half months what I was going for three months or so.
Mike Watts:It took us six. Yeah. So by month six, it was live. And just so we're clear, folks, it is not complete. Right?
Mike Watts:Like, the cleaning manual is not ready. The renter's welcome guide is not ready, but we just went live. Right? It's like there's a time you put a deadline to just go live. And so we're gonna fix all that stuff.
Mike Watts:It's gonna get done. But we But
Kate Northrup:it is complete enough to rent. Yeah. That's what I mean.
Mike Watts:Yeah. I'm talking about all the little I'm just talking about sometimes when we go into a project, has to be perfect and complete before we go live. Our house is done. People can stay there, but it's the details around the user experience is not finalized yet. And we do this in our company too.
Mike Watts:It's not always finalized before it goes live. We just go live with it because it's we need a deadline for ourselves to go live.
Kate Northrup:Also, think it's really important just as a lesson in entrepreneurship. You know, Seth Godin talks about it all the time. Just ship. Like, to give obviously, our customer experience is like, top, top, top always. I mean, just even this last Relaxed Money enrollment, we had an unbelievable number of students reenroll.
Kate Northrup:Like, our our reenrollment rate is it kind of blew my mind. So our customer experience is top of mind, just to be super clear. And we don't obsess about perfection before we get going because so many of the things, whether it's in our online business or now in our new short term rental business, you can't know what needs to be fixed until you're going. Mhmm. And a lot of people make the mistake of never actually going live because they're waiting for perfection, and then they just never go live.
Kate Northrup:Because you never actually will be completely ready with anything.
Mike Watts:Correct.
Kate Northrup:Just what I'm saying. Yeah.
Mike Watts:What were you talking about before that?
Kate Northrup:Well, my next question is
Mike Watts:Okay.
Kate Northrup:What's our overall goal? So we got started originally because of tax strategy.
Mike Watts:Yeah. So our business supports our lifestyle. Right? It pays the bills. We have employees.
Mike Watts:We pay salaries. That's been really great, and we've been doing that since 2013.
Kate Northrup:Have retirement. We have health care. All the stuff. I mean
Mike Watts:Everything we teach inside of Relaxed Money, the flagship program that we have, we did to purchase this house. And then we bought our primary residence here in Tennessee where we're gonna move to in about a month to live. And those funds we also use for that, we did as well. So it was cool to see things that we have been saving and doing and discipline. We were able to leverage those to do these projects.
Mike Watts:Overall goal for me was to diversify. I would love to get to the place where our short term rental revenue is supporting our personal life. Profit. Yeah. The profit profit and revenue from the short term rental space allows us to use that money to support our personal life.
Mike Watts:So instead of pulling funds from the business to support our person taking distributions from our company to pay for our personal life, we can do that through these short term rental properties. And that way, the business is bonus cash, and then it allows us for growth that takes place versus now we have to support Kate and Mike's life through the company as well.
Kate Northrup:We get to.
Mike Watts:Or we get to. Sorry. Yes. Correct. Good correction.
Mike Watts:So that would be my dream of what we're doing to do this, and it's just it's really fun. It gives me a different vehicle of creation and systems and organization versus our company that has been really fun in this project. So to me, that would be the goals in the short term.
Kate Northrup:Yeah. Yeah. Great. All that to say, I'm just excited about this era and to see what comes of it with our business and to see what comes of it with the short term rentals and our online business and my writing and your other projects. It's just really exciting.
Kate Northrup:And for all of us, it is very smart to be investing in multiple streams of income. So regardless of who you are, what your career is, what you're doing, Diversification is so important, especially right now when things are changing so fast. Yeah. And so people are always gonna need a place to stay. And this feels like a really good long term investment.
Mike Watts:One of the biggest booms in real estate right now is, like, furnished home finder because housing's so expensive. And for families that are have a lot of people, they need a place to live, so you can rent out multiple rooms. And it just allows there's a lot of creativity that exists there. And I know some folks would be like, oh, I don't have the money. I don't have the time, and it's like this, and they shut it down.
Mike Watts:It's like, no. It's there. You can get capital. You can get management, properties to manage. There's the ability is there outside of we're just talking about real estate for this conversation, but it's like outside of that is you just have to search for what you want.
Mike Watts:And as the world changes because I'm setting this property up, I'm learning from this community where it's everything is automatic. It triggers the cleaner to show up. The cleaner uploads me photos. They give me the review. They tell me if anything's broken.
Mike Watts:We report it to the insurance company, and then they can give me those replacement parts. You know, there's all these short term rental companies that work together with these type of properties. So it's all there, and that allows for expansion to take place. Because I want to we invested the capital. I've put in the time.
Mike Watts:Now I'm trying to set this property up where it's very much more automatic.
Kate Northrup:Yeah. It's really about building the systems.
Mike Watts:It's building the system around this that allows to make your life easier. So if I do add a second or third property, the hardest part is getting it started and getting things set up. And even the pricing. We're using this website that is all algorithmic based pricing.
Kate Northrup:Really cool.
Mike Watts:And so you can mark up the hot seasons could be more expensive than down. So instead of me watching this thing every single day, it's all set up automatically, and the pricing is constantly changing, and it pulls all the listings from around there. All this stuff is data driven decisions instead of me, should I raise my price? I not raise my price? Should I go here?
Mike Watts:Should I give them three days? Should I give them four days? Should I get Right? It's all the games that we can play around this, and there's a lot. And there's many different platforms that you can host this property on.
Mike Watts:So it just it's there's the expansion is there if you're open to the idea and being creative. Yeah. And this property, for the first time, we won't make this mistake again. It's like now that I've been through so much construction and so much rehab, things to look at, it's much easier Yeah. Now to say, okay.
Mike Watts:This is what we're really walking into. And
Kate Northrup:I Our next one will be a little bit more turnkey.
Mike Watts:Right. And what the group that I'm a part of recommends is to keep renovations to a minimum. This one was a special exception because it's to Kate's hometown. But it's like, okay. What can you do with paint, wallpaper, furniture?
Mike Watts:Maybe the bathrooms just need a facelift or something that's there, but the majority of stuff is already complete, so you don't have to do a gut renovation like we did.
Kate Northrup:Amazing.
Mike Watts:Yeah.
Kate Northrup:Well, if anybody wants to go have a stay in Yarmouth, Maine, fifteen minutes from the incredible restaurants in Portland, Maine, the link to our Airbnb is in the show notes. It's precious. It has really good vibes, and it is always cleaned with nontoxic products. It has ceramic pans. It has organic mattresses, organic sheets, and no air fresheners, none of the weird toxic stuff.
Kate Northrup:So it is a completely clean, toxin free property. So for my sensitive travelers who have skin issues, who can't stand the scents, all of the the detergents, all of that stuff, this is the spot for you.
Mike Watts:Yes. Yeah.
Kate Northrup:The end.
Mike Watts:That's it.
Kate Northrup:Stay tuned for part two where we divulge all the numbers. Mhmm. If this episode sparks something for you, don't
Kate Northrup:leave it as just an insight. The recalibration field guide is where you turn what you heard into movement. Inside, you'll map your current money ecosystem state, audit what's supporting you and what's leaking, and identify the next upgrade that will actually change how money moves in your life. The listeners who download it and use it are the very same ones who will come back and tell me that everything shifted. You can download it for free
Kate Northrup:at katenorthrup.com/fieldguide,
Kate Northrup:and the link is also in the show notes. I'll see you in the next episode.