By Sean Dempsey
01/26/24
Someone recently asked me how I attained the properties in my real estate portfolio. And to be honest I had to stop and think for a moment. Time has a monotonous way of making someone simply put one foot ahead of the other and then the next so that the entire journey is masked in a mixture of banality and haze. Because the honest answer is that it’s not a very exciting story—neither sexy nor filled with amusing anecdotes. But, in the off-chance it might be useful to others, I’ll be happy to recount it and try to make it as interesting as possible!
To start, I didn’t begin my journey into real estate with the intention of owning a ton of rental/investment properties. Far from it. I only became much more driven towards that pursuit later on.
I purchased my first property in spring of 2007. It was a small 800sqft condo located at 13 Back River Rd Unit #116 Dover NH. I wound up purchasing a unit literally across the street from where I was previously living–largely because I hated the arduous task of moving out … yet moving across the street seemed manageable enough (see, I told you I wasn’t very exciting).
I owned that condo and enjoyed it for many years. I also owned a nascent marketing agency at the time, which I was diligently working on and growing fast. So as things improved for me financially, I decided to move out of my small condo and buy a single-family home.
The market had crashed hard by that point (it was 2009), so I was very reluctant to sell my condo which I had purchased for $165,000 for a paltry $83,500 (what my agent said it was now worth). Thus, renting it seemed a more prudent decision. So began my head-long dive into real estate…
I first tried the age-old technique of “figuring it out myself.” No knowledge. No reading of books on real estate. No podcasts existed back then. Want to learn how to swim? Dive in the pool!
So I listed my condo on Craigslist for a monthly rent that seemed consistent with my area, and voila! Not even 15 minutes later I was flooded with requests for tours and rental applications. I was astonished! Sure, my place had some cute little amenities (I had revamped the small kitchen and it was admittedly pretty badass); but generally speaking I thought it would be difficult to add enough lipstick to a pig to fool people that this was anything more than a 900sqft hole in the wall. Boy, was I wrong. Real estate was a world I soon realized I knew absolutely nothing about and wanted to learn more…
Fast forward 5 years; I continued to rent out my condo during this time. I eventually hired a property management company, because on my very first rental agreement I learned (the hard way) that the wrong tenants can mean the difference between peace in your life and utter horror. Without getting into the messy details, in that first year I experienced everything from regularly missed rent (and the myriad excuses that come with it), to angry neighbors complaining about dog feces, to 3am calls about leaky showerheads, to $1000 monthly heat bills because heat was “included” in the rent.
Suffice it to say, I highly recommend anyone looking to dip their toe in the water of real estate GET A MANAGEMENT COMPANY to deal with the three T’s of real estate: Tenants, Toilets, and Taxes. Also: pay the measly $50 to get a credit check on your tenants; take the time to get and read testimonials from their previous landlord(s). It is well worth the small investment!
Anyway, after 5 years or so of living in my new home (2 Alex Court in Somersworth NH), I began to wonder if it were possible to replicate some of my success renting my condo. However, the only other property I owned was my primary residence. Well, around this time a certain cultural phenomenon was hitting the internet: Airbnb. The premise sounded interesting. And, as before, I decided to jump in with both feet. I listed my home, a 2,800sqft home in Somersworth NH – which is a very small town not near any major attractions, and, frankly, not exactly known for its superb quality or low crime rates. Nevertheless, I had nothing to lose…
I posted my home on Airbnb for $500/night (just to test the waters), thinking it would be insane for anyone to pay that much. I had 3 bookings within the hour.
Wow. I must be missing something. Being the consummate capitalist, I raised my prices. $750/night.
Several more bookings were reserved the next day. I increased it to $1,000/night! More bookings. $1,200/night… Soon up to $5,000+/weekend for a summer stay.
Needless to say, I was blown away. Who are these people? Who’s dumb enough to rent a home in Somersworth New Hampshire for this kind of stupid money??
Obviously, I tested the waters carefully and vetted each stay. Some were certainly better than others. But with $5,000+ of income flooding in on the weekends, I didn’t really care too much even when the house was trashed. Hell, even after paying a cleaning company $500 to clean up after a bad stay was well worth the $4,500 weekly profit!
The most important thing to me was definitely ensuring my guests treated my neighbors with respect; and every so often that did become an issue. But with attempts to remediate those challenges and continuing to stress the importance of noise levels and respect to my neighbors, I was eventually able to work out a rudimentary system of communication, quick turnover, and maximum profitability.
I booked nice hotels on the weekends while my home was rented out, bringing my family with me. And I reinvested 25-40% of my earnings back into the property, continuing to enhance and refine it. I added a movie theater, a hottub, a gazebo, and a koi pond. I even added a 2,000sqft deck and intricate outdoor walking paths on the property for my guests’ enjoyment.
The more features I added, the more I could charge! Soon I was up to getting over $7,500/weekend for a summer stay at my 3 bedroom ranch. Rates eventually plateaued (and I was perfectly happy with that).
I revised my reinvestment strategy, now putting just 10% back into the property and banking the rest. Over the next few years, I added a 6ft walk-in shower, additional bedrooms, a 3-season veranda, and other amenities and “nice to haves” to make the place suitable for large groups and fun gatherings. Rather than shy away from the dreaded “bachelor party” (the bane of the Airbnb world), I embraced this market with open arms. These stays were my lifeblood. By 2018, I had hosted over 100 bachelor/bachelorette parties at my home!
Once again, the vast majority of rental income coming in each week I banked. I was capitalizing my next real estate purchase(s)! Specifically, I leveraged my Infinite Banking Concept (IBC) whole-life insurance savings system of policies and stored as much cash as possible (read more about that here). I was determined to replicate my success in Somersworth elsewhere…
Fast forward to 2020. It was time to bring on some partners. A wiser person than me once said: if you want to go FAST, go alone; if you want to go FAR, go with others. Well, I went for the distance. I met with two close friends I had known for over a decade and explained my vision. I wrote up a business plan (a pretty decent one if I do say so myself; and you can even download and view it here if you want). I explained the success of my property and how short-term rentals were a source of considerable income. So we jumped into proverbial ‘bed’ together and began looking at suitable properties to fit the bill.
First, we started an LLC for legal and liability protection. We called it “T&S Properties LLC” – which is still a misnomer to this day because the T stands for Tim and the S stands for Sean; but there is a third member, Joe, who’s name isn’t properly represented in the name of the company. That said, TS&J Properties doesn’t have the same ring to it…
In any event, with the help of a very proficient real estate agent (the BEST in fact; her name is Lisa Bultheel and if you need to find real estate in New England, give her a call!), we found a terrific large farmhouse located in Parsonsfield Maine. It had 6 bedrooms, a view of the mountains, and more rustic charm than you could shake a stick at! There were some logistical complications in the sale not worth going into—and the place needed around $150,000 in significant renovations to get it suitable for our purposes—but overall, we were excited by the opportunity and took the plunge. All in, it was around $575,000 after significant renovations. In case you’re curious, we put in an 8-person hottub, a beautiful back deck to overlook the mountain and lake views, a new bathroom, and a new foyer to open the space up.
The income produced over the next year and a half (admittedly less than that of my Somersworth location but enough to validate the business plan) was sufficient for us to look at a second location. We expanded our rental enterprise into the town of Bennington VT. We purchased a 200 year-old historic inn there with 6 bedrooms and wall-to-wall wood paneling. We renovated that home as well, putting in new carpet, a hottub, and a gorgeous brand-new bar room. The purchase price was $529,000 and we had around $100,000 in the renovations.
With three properties now under my/our belt, a major snag now became apparent: time.
Short term rentals are fun & exciting investments. But they are certainly not passive! And being the primary manager of the end-to-end experience, I began to get overwhelmed with the process of managing three (3) entirely unique properties – a herculean effort which comes with three different cleaning staffs, three sets of maintenance personnel, three times the number of guest communications, three times the number of recurring deliveries of soap, shampoo, and everything else! It was time for a property management company!
Only, here’s the rub: property management companies for short term rentals are few and far between.
I looked around and, surprisingly, no such company existed in New Hampshire. Well, having managed Airbnbs for over 10 years at this point, I felt pretty well suited to build such a company. I smelled opportunity!
I assembled a team (easier said than done by the way), and began training them in the ways of effective short-term property management. Within 12 months, I was virtually hands-off and the team was handling the management. It wasn’t all sunshine and rainbows to get there, but every challenge can be overcome and every speedbump navigated around. We called this company “ManagedBNB” – because a business like this needs a name to speak for itself. I personally hate companies where you need to guess what they do.
With the short-term rental empire now fairly operationalized and turning more passive each day, I felt good about where things were. But fate sometimes can throw opportunities your direction in curious ways.
In 2022, my sister-in-law sent me a text message joking with me. I don’t recall the exact wording, but it was something akin to “hey, this place is ridiculous. You should buy it! haha”
I clicked the Zillow link and was mesmerized. A home in Morrisville VT with every possible trapping and amenity known to man! It boasted multiple hottubs, an indoor pool, a movie theater, two kitchens, 12 bedrooms, and enough space to host 50+ people. I clicked the link to request a showing immediately.
After driving up to Vermont with my family the next day, we toured the house. It was every inch as terrific as the pictures showed. It is the only home in my entire life for which I’ve ever made an offer to the real estate agent on the spot, while in the house during the initial tour. This place had to be mine. I didn’t even haggle; I offered asking price.
Now with four properties in my real estate portfolio, things slowed down a bit…
Just kidding. I had become a bit addicted. Real estate was now in my blood. I used the new rental revenues coming in to continue to feed my IBC policies. This was my new pattern! When my IBC ‘bank’ became large enough to capitalize a new purchase, I bought more real estate again.
In 2023, along with some dear friends and colleagues, I purchased a lake house in Milton, New Hampshire (www.RentThreePonds.com). And at the tail end of that same year I also purchased a 9-unit in Manchester NH, attempting to break into the multi-family rental market.
Summary
Real estate is a fun, and exciting asset class because it has so many opportunities. You can fix-and-flip for a quick profit. You can rent long-term. You can rent short term … or even mid-term. As for me, my goal is PASSIVE investing. Leverage the asset to creative passive cashflow. To that end, going forward my aim is to invest further in the multi-family asset class. My primary financial goal, as Robert Kiyosaki famously advocates, is to have my passive income exceed my monthly expenses. Only then does one have financial freedom. Real estate, I’ve found from personal experience, is a crucial key on one’s journey to financial freedom.
