Agents Building Cashflow

EP 159: Top Tips to Transform Your Wealth Through Profitable Vacation Rentals with Drew Pierce

• Drew Pierce

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The Co-Founder and CEO of Sage Vacations, Drew Pierce, shares his extensive knowledge and hands-on experience in the short-term vacation rental market, revealing the strategies and tools he uses to identify profitable markets and manage properties remotely. He delves into his latest project, a glamping resort in the Smoky Mountains, explaining the challenges and opportunities in this unique venture. 

Drew's practical advice and detailed breakdown of his business model offer valuable insights for anyone interested in vacation rentals. Don't miss this episode to learn how to turn your commissions into cash flow with short-term rentals!

Key takeaways to listen to:

  • The importance of thorough market research in identifying profitable vacation rental locations.
  • Key tools and systems for managing vacation rentals remotely, including property management software and dynamic pricing tools.
  • The potential and profitability of investing in glamping resorts within national parks.
  • Challenges that come with investing in vacation rentals, how to navigate local government regulations, and the importance of assembling a skilled team to overcome these hurdles.
  • Benefits of creating unique and attractive rental properties to stand out in a competitive market.

About Drew Pierce

Drew Pierce is the Co-Founder and CEO of Sage Vacations, the only full-service vacation rental investment and management firm that partners with investors to start, manage, and grow their vacation rental portfolios.

For most of his life, Drew preferred vacationing at short-term vacation rentals - a place that feels like a home away from home. His “eureka” moment came after one wonderful weekend spent with friends and family, inspiring him to join the market and create an equally wonderful guest experience. With limited funds, he began pitching potential investors on a joint-venture deal, leading to the birth of Sage Vacations. 

Connect with Drew Pierce:

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To connect with Randal and learn more about passive investing, visit www.ridgelineig.com and follow our social media pages below!

[00:00:00] Drew Pierce: I plan on going into hotels eventually, but I'm kind of more leaning, I guess, towards the glamping because there's just a window of opportunity. You have to do it where it's like in a national park. Like, you know, how I explained earlier, right? I go through 900 markets and this and that I went through a similar process with that.

[00:00:15] Drew Pierce: Yeah, I'm figuring out where did it go for glamping, but I only had like 50 or something like that's in my list to go off and I've got great places to do this at just because I'm, you know, I'm not an expert in every single place you could possibly do a glamping resort. So I'm going mostly off of like state and national parks.

[00:00:32] Intro: If you're a real estate agent earning 200, 000 a year, and you want to grow your passive income, this show is for you. Learn secrets other agents use and hear from experts in our field who will guide you on your journey to investing in assets like apartment communities. So you can take your commissions and turn them into cashflow.

[00:00:52] Intro: Here's your host, Randall. Let's dive in. 

[00:00:54] Randal McLeaird: Hey, welcome back. I have a show today. We're talking to Drew Pierce and we're talking about [00:01:00] short term rentals, his scale up and what he's working on. And now a really cool project that he's working on in the Smoky Mountains. So if you're interested in short term rentals, or you're interested in investing and figuring out what.

[00:01:12] Randal McLeaird: Returns kind of look like on short term rentals. This shows for you, drew lays out at the very beginning, a ton of the tools that he uses and how he focused down into a single markets and the amount of work that he had to do in order to get to the markets that he's. So again, that alone is a ton of value add that he had.

[00:01:31] Randal McLeaird: So I really appreciate that he is willing to share how he has structured some things in his business. I feel like you're going to get a lot of that show. So please, if you're getting value, go on written review, wherever you're listening to this, give us some comments in the review. It helps us a ton to get awesome guests on and to bring you some value so that you're able to go and turn your commissions into cashflow.

[00:01:49] Randal McLeaird: Here we go. Let's talk to Drew. Drew, it's awesome to have you on the show, man. Thanks for joining me. I'm excited to talk to you today about what you're doing in the real estate space and short term rentals in particular, because that's your deal. So [00:02:00] why don't you go ahead for those who don't know you, tell us a little bit about yourself and what you're working on right now.

[00:02:04] Randal McLeaird: Sure. Yeah. Thanks, Randall, 

[00:02:06] Drew Pierce: for having me on the show. I'm excited to be here. Yeah. So what I do is I do short term rentals. Specifically. So what I do is I partner with investors and I'll go out and I will do all the research to figure out where's the best place to buy the property. I'll actually go out and build a team in that area.

[00:02:24] Drew Pierce: I'll design the property, remodel it, the whole nine yards, and then I will actually manage the property after it's all been said and done. Do you focus only in the Utah area or is this everywhere? I'm actually don't have Any properties in the Utah area. That's a really common question that I get, my properties are actually in the Smoky mountains of Tennessee and in the Orlando, Florida area.

[00:02:46] Drew Pierce: Got it. I'm 

[00:02:46] Randal McLeaird: going to Orlando tomorrow for Disney world. My wife and I are literally just back and forth just now. Like, do you have the app? Do you have it? So if I knew you like three weeks ago, maybe we'd stay at your place. Um, so it's interesting. I hear a [00:03:00] lot of people talking about Smoky mountains. Like, how is that a thing?

[00:03:03] Randal McLeaird: And why is that 

[00:03:04] Drew Pierce: a hotspot? Yeah. It's been a hotspot for a long time, but really it became with Dolly Parton. When she grew up, there was nothing out there in Pigeon Forge. And she's turned it into this huge hotspot for vacationers to go out there. Like she owns the entire town. Basically she has Dollywood out there.

[00:03:20] Drew Pierce: She owns all the dinner shows. There's now all your basic touristy type of things that you'd see out there. But what you mostly go there for is the scenery. For the smoky mountains. It's just, it's by far the most visited national park. It does more, has more visitors every year than like Yellowstone and the Grand Canyon combined.

[00:03:39] Drew Pierce: Awesome. Okay. 

[00:03:39] Randal McLeaird: I mean, we went when we were kids, but I haven't been back. Good to know. And Orlando obviously is a hotspot. So curious. And are those the only spots that you will work with investors or people you're trying to work with? Because again, you're doing a turnkey situation. So if I came to you, I'm in San Antonio.

[00:03:53] Randal McLeaird: I was like, Hey, I've got a place in Austin. And I, uh, I'm looking at, would you establish an entire set up there or [00:04:00] you only focus in those 

[00:04:00] Drew Pierce: two areas? No, I can establish anywhere if they already have a property in place. That is one of the things I do is I do manage other people's properties if it fits the brand, but no, I can do it anywhere really.

[00:04:12] Drew Pierce: Got it. 

[00:04:12] Randal McLeaird: Okay. So let's talk to that. How have you been able to set that up to manage from afar? Yeah. What's the process of doing that again? If somebody is listening, they're like, Oh, that sounds awesome. I'm not in that city, but how would I even go about doing it? Or is it. I don't know. Honestly, it's one of those things like you already do it.

[00:04:30] Randal McLeaird: You have the playbook, but if somebody's trying to mimic you, like what would you recommend they do? 

[00:04:33] Drew Pierce: Yeah, it's actually a lot easier than you think. A lot of people are afraid to do, to invest or manage anything outside of their own backyards. Like I wouldn't live within 20 minutes of where it's at. I won't be able to go fix the place, look at it myself, this or that.

[00:04:45] Drew Pierce: But really it comes down to just having good, reliable people and systems and processes in place. So it starts first with making sure obviously you have a good property to manage, but then you got to get the right property management software. Okay. In place. So I personally use host away, [00:05:00] but if you're just starting out, I'd use something like I GMS, because I believe they are free back in the day.

[00:05:05] Drew Pierce: I GMS, I GMS. com. They will automate all your messages for you. Send out to the guests. And we'll sync up with the different, uh, OTAs, online traveling agencies, booking channels, you know, like Airbnb, Verbo, those guys. And it just works very smoothly with that. And then the next thing you're going to want to get is cleaning software.

[00:05:27] Drew Pierce: I recommend Turno for that because that automates the scheduling. And also when you're just starting out, you can't Build your own cleaning crew. There's not enough work, consistent work for them, but a cleaning company that fits for them, you know, like, yeah, I can add another one or two properties to my portfolio.

[00:05:43] Drew Pierce: That's fine. And they have a marketplace on turno. How do you spell it? Turno. C U R N O. 

[00:05:49] Randal McLeaird: Okay. 

[00:05:50] Drew Pierce: Yeah, they used to be called Turnover B& B, and I guess it was just too long, so they Turno. Makes sense. But, uh, they'll automate the entire process for you, so whenever a guest checks out, [00:06:00] automatically schedule the housekeeper to go there and clean the place for you.

[00:06:03] Drew Pierce: They can upload pictures, checklists, all that type of stuff. But the biggest thing is that it automates the payment and their tax forms at the end of the year. Okay. So it just makes it super simple like that. And the last thing I would recommend is to make sure that you get pricing software, dynamic pricing software.

[00:06:18] Drew Pierce: So something like Wheelhouse. That's what I use personally. And then there's also beyond and price labs as well. They're both popular. Those all work really well. Cause a lot of people have no idea what to do for pricing, especially when they're first starting out. And so that automates the entire process for you, lets you know exactly what you can charge for the place.

[00:06:36] Drew Pierce: And then it obviously makes adjustments. As time goes on, if you're getting lots of bookings, it'll increase your price. If you're not getting any bookings, it'll decrease your price. 

[00:06:43] Randal McLeaird: Yeah, that's awesome. Solid tips already to just set up that business. You said key processes, so that includes some of the software, the platforms.

[00:06:51] Randal McLeaird: Well, those are systems really. So what about people? Where are you finding the, I guess the cleaners are all through Turno? And then [00:07:00] who else do you need, like handyman, like what's happening, how do you automate the maintenance requests and that sort of thing when you're not in the city? 

[00:07:06] Drew Pierce: Yeah, so there's two easy ways that I can do it.

[00:07:09] Drew Pierce: And the first one is most of the cleaners have a handyman that they work with and recommend. So that makes it super easy and convenient that way. And then another way is just to find people on Facebook, just go to Facebook job group. 

[00:07:20] Randal McLeaird: And 

[00:07:21] Drew Pierce: you know, there's usually tens of thousands of people on there and you just say, Hey, I need a handyman.

[00:07:25] Drew Pierce: Yeah. And you will get 10 to 20 people responding and saying, I can do it. I can help. I have the experience and blah, blah, blah. 

[00:07:32] Randal McLeaird: Okay. So it makes it really 

[00:07:33] Drew Pierce: easy. 

[00:07:34] Randal McLeaird: Yeah. All right, then let's talk, I guess, specifics for your company and how you guys are set up and structured. Is it you and a partner? I know you co-founded Sage, so how many people do you have to have in order to manage this, and how many properties do you guys have?

[00:07:46] Drew Pierce: So it's basically just me at this point as far as like the management perspective of it. But I do have a team, a small team, you know, I have people who handle the guest communication, someone who handles the maintenance virtually as well. Make sure they, they send people and [00:08:00] coordinate all that. And then I have a housekeepers.

[00:08:03] Drew Pierce: I have my own crew for that in many of the places. And then that's it. It's as far as people's concern. I'm sorry, I forgot what the other part of your question is. It was just 

[00:08:11] Randal McLeaird: like, how many units are you working on right now? Like how many can one man handle? 

[00:08:15] Drew Pierce: Sure. So, you know, most of my time is spent on growing an increase in revenue and things like that, optimizing the business.

[00:08:21] Drew Pierce: But if I really wanted to, if I just wanted to float, I could do it all myself. And there's about 12 units that I have in the portfolio. So, okay. A 

[00:08:30] Randal McLeaird: lot of guys that I talk to, at least locally and through this podcast, they will manage for others and then they have their own. So are those yours or are they others or a combination?

[00:08:39] Randal McLeaird: I 

[00:08:40] Drew Pierce: personally own seven 

[00:08:41] Randal McLeaird: properties. 

[00:08:43] Drew Pierce: And then I manage the others. 

[00:08:44] Randal McLeaird: Okay, so let's talk about the evolution then. How did you get into this in the beginning? Seems like you traveled to one, you saw it, you're like, oh this is great, I want to redo this, I want to recreate it. So what was the zero to one, like the first deal that you bought and how did that even come to exist?[00:09:00] 

[00:09:00] Drew Pierce: Yeah, absolutely. So you got it. You got it right. Basically, my family and I went and traveled with another family to a place in St. George and, and it was something that I'd always wanted to do. I always thought that, uh, but I wanted to be on the investor side of it. And I just thought, you know, one day when I'm quote rich, I'll buy a property, you know, a vacation home somewhere that I want it to be and use it for myself whenever I And rent it out whenever it's not being used or whenever I'm not using, I mean, to say, and yeah, basically I just saw what they did and I was like, I don't need to wait for this.

[00:09:28] Drew Pierce: It was just kind of like an aha moment. It's like, no, this is like the right time to do it. And this was in 2019 when it was growing and booming, but it was still relatively speaking in the early stages of, it's not a very like, it's a much more mature market and industry now than it was just five years ago.

[00:09:44] Drew Pierce: And so at that point, I actually got serious about looking for investors and I ended up having to strong arm my parents into being the very first investors that I ever had because they had just sold their business that I helped build for them. And just said like, you have all this [00:10:00] cash, let's do something with it.

[00:10:01] Drew Pierce: And they were really nervous about it. And like I said, I had to leverage like other people, like, if you don't buy this house, like they're gonna, I have these other investors and it was all real, like other people were interested in, in doing it, but eventually they were the ones to be the very first investors that I had.

[00:10:14] Drew Pierce: And so we just found a property out and just did a whole bunch of research, figure out, you know, the best research that I knew how to do at the time without any real experience. Where's the best place to invest? And I found that Gatlinburg, Tennessee was the best place at that time. That name just kept coming up over and over and over again.

[00:10:29] Drew Pierce: And then I found a place that seemed like it would generate about a 25 percent ROI for the investors. In this case, my parents. And so we just pulled the trigger on it and the rest is history as they say. 

[00:10:41] Randal McLeaird: All right, let me ask you then. If somebody were starting today, what research should they do to find that location?

[00:10:48] Drew Pierce: Sure. So at the time when I was doing it, it was not very sophisticated. I was just going on Google, you know, trying to find the top places to invest and using random people's like Forbes lists, you know, and as great as some of [00:11:00] these resources are, they're not in it. They're not living it. They're just doing their own research and just saying, these are our findings.

[00:11:06] Drew Pierce: Type of a thing. The best place, the way that I do it today, which I'd recommend doing it for anybody, cause it's worth, it takes a lot of time, but it's worth the time investment and that's. I make a list of about, uh, all the vacation rental destinations in the country currently here in the U. S. And my list consists of about 900 cities.

[00:11:26] Drew Pierce: And then what I do is I go on AirDNA and then I look and see what their travel score. And on the travel score it'll say different things like, is it growing? And if the market is growing, is it still getting booked up? So it kind of tells you what the saturation is like there or if it's a growing market.

[00:11:42] Drew Pierce: And then from there, I just gauge basically from a general ROI perspective each one. So I just look at like what the basic home prices are for that area, the market, and then what also is revenues being generated on a per house average. And then from there, that takes like [00:12:00] six hours to do a focused work.

[00:12:02] Drew Pierce: And then I'll actually narrow it down to say my top 10. And I like to invest in bigger markets, by the way, rather than smaller markets. It's a bigger investment. If you want to invest in a market that makes it a destination, because you have to draw people in, you have to invest a lot of dollars into like Instagram advertising, and really it's a process to do that.

[00:12:20] Drew Pierce: Whereas if you're just getting started, it's better to be in a, in an established market that people are already trying to visit. So. That's what I like to do is go into about a place to have about a thousand rentals already have a rental score of 80 or above. And then I start narrowing it down and saying, okay, like the general ROI says it's this, but let's start looking at it closer.

[00:12:40] Drew Pierce: And then you start weeding those out because a lot of times they'll say, Oh, the average house is only 200, 000. Well, you realize that the places that are. Zoned for short term rentals, for example, those homes are actually 600, 000 type of a thing. And so you just kind of go through that until you filter it down to about two or three markets is all you're going to be left with after [00:13:00] having 900.

[00:13:01] Drew Pierce: And then you start narrowing it down by the neighborhood. And AirDNA also has a great resource for that. It's only like a hundred bucks or something like that. You can rent or you can purchase it for all the data that they have on that particular city. And it will show you things like, um, where the top performing properties are listed at.

[00:13:18] Drew Pierce: And then so that way you can circle it, go out to realty. com, use their circle tool type of a thing and just look to see what properties there actually match what it is that's going to fit your parameters for what's going to be a good investment. 

[00:13:33] Randal McLeaird: Man, solid breakdown. Like that's awesome. Ton of value in, in that process that you go through to narrow those down.

[00:13:39] Randal McLeaird: So I assume you've done all that work and you've narrowed it down to those two markets, , and that's where you're buying and doing things. Yeah. Shortcut. 

[00:13:45] Drew Pierce: Yeah. At the time that was, yeah. Okay. Exactly. That was a shortcut. Yeah. Actually, what's funny is I get people who were interested in investing with me, and then they decide, you know what?

[00:13:52] Drew Pierce: 'cause people who invest with me, they're silent partners. That's kind of one of the rules. I don't want too many cooks in the kitchen. 

[00:13:58] Randal McLeaird: Yep. 

[00:13:58] Drew Pierce: And so I just tell 'em [00:14:00] like. They said, and then they said, actually, I do want to be involved. My wife wants to design it, things like that. And so they'll find out where I'm buying and we'll just buy one down the street.

[00:14:07] Randal McLeaird: Yeah. 

[00:14:09] Drew Pierce: That's happened a few times. 

[00:14:10] Randal McLeaird: Yeah. Are they investing with you and doing that? 

[00:14:13] Drew Pierce: No, they just, uh, they said, all right, well, I saw Drew just bought here, so I'm going to buy one. Yeah, there you 

[00:14:18] Randal McLeaird: go. Okay. Well, let's talk about the investor side of it, because you said 25 percent ROI to your investors. Which was, were your parents at the time?

[00:14:27] Randal McLeaird: I don't know. Is that still the metric that you're targeting for people investing with you? And is that annually or what is that? That is annually. Okay. 

[00:14:34] Drew Pierce: Yeah. Yeah. That is annual investment. So how it works, I guess it'd be good to give you some background as to how it works and how I come to that number.

[00:14:40] Drew Pierce: So when people invest with me, what they do is they say, here's a hundred thousand dollars. That's the minimum to invest with me at this point. And then I go, like I said, I do all the research by things like that. And then what we do is we split the revenue minus the essential expenses. 50 50. So that what I call like the gross profit.

[00:14:56] Drew Pierce: So the essential expense are things that are pretty obvious, like the [00:15:00] mortgage, the supplies, the cleaning, that type of stuff. It's all kind of part of that. What I take on though, is the maintenance side of it. And then also anything that's administrative in nature I pay for. And so as a result, and it kind of works like an annuity to where if the property for whatever reason isn't profitable, I eat that cost.

[00:15:19] Drew Pierce: So they invest the money once and then that's it. Type of a thing. And so their ROI, like, uh, my parents ROI will still hover around in the 30 plus percent range after all this time, even though obviously the market's gone up and down since then. But there was a point where they were making 45 percent ROI at this point, buying a market property today, I would likely once I'm done with the current project and I'm going back until I say vacation rentals, I don't know if I'll be investing in those same two markets again.

[00:15:50] Drew Pierce: I mean, it just depends on where the data is taking me right now. Cause as of right now, I wouldn't be getting those kinds of returns in the Orlando area or maybe even in the [00:16:00] Smoky Mountains area. 

[00:16:01] Randal McLeaird: So what's the gross typical ROI on a property then? Because if you're targeting 25 plus to the investors that you have.

[00:16:09] Randal McLeaird: You're obviously making money in there somehow, some way. So what is the property performance rather than the return performance to investors? So how 

[00:16:16] Drew Pierce: much revenue basically are they bringing in? 

[00:16:19] Randal McLeaird: So if you're paying out 25%, is that property producing a 50 percent ROI? You're getting 25 percent after expenses?

[00:16:26] Drew Pierce: I'm not getting a 25 percent return at the end of the day because like I said, I still have to pay the administrative and the maintenance costs with it. Also any upgrades with it. So like I invested. 30, 000 just recently into one of my properties that's in Orlando where it was just to take it up a notch in terms of the Neverland theme for it, you know, so.

[00:16:46] Drew Pierce: I reinvest pretty much everything I have back into it. 

[00:16:49] Randal McLeaird: Yeah. If unlike a multifamily deal, it's the easiest thing I can think of right now. There's a return to the investors, right? I'm targeting that I want to pay you guys 15 percent AAR or whatever that number is, [00:17:00] right? Over the average annual return, right?

[00:17:02] Randal McLeaird: That's what I'm targeting to the investors. But as the operator, I'm still making Every turn on top of that. So the property itself has to produce better than that. 15 percent average annual return. So I'm saying in general, what are you seeing as a return from the property 

[00:17:16] Drew Pierce: before the payouts? Yeah, exactly.

[00:17:17] Drew Pierce: Payouts like that. That's a good question. I would say it is closer to 50 to 60 percent sometimes. 

[00:17:24] Randal McLeaird: That's incredible. Yeah. 

[00:17:25] Drew Pierce: On some of the, the older properties. Yeah. 

[00:17:27] Randal McLeaird: Yeah. 

[00:17:28] Drew Pierce: And then on properties that have been producing the last couple of years, it's a lot lower, it's going to be closer to. Like 20 to 30 percent range type of a thing.

[00:17:38] Randal McLeaird: And so, yeah, so you may be seeing, you personally may be seeing like 5 percent of gross, something like a five to 10, depending on what that is producing on the older properties. If you're paying out 25 plus, I mean, it could be a lot higher than that for you. 

[00:17:50] Drew Pierce: Right. 

[00:17:50] Randal McLeaird: Okay. Yeah. Just trying to figure that out because I'm a broker.

[00:17:54] Randal McLeaird: I've been flipping house for a long time and I've looked at the short term, midterm sort of thing, and I've had. Number of guests [00:18:00] come on and talk about it. And I still haven't pulled the trigger. Not sure why just haven't pulled the trigger, you know, it's like, I love the idea of having the vacation home, but I kind of felt like I've missed the wave and through COVID everything got so expensive.

[00:18:12] Randal McLeaird: That, I don't know, right? You're talking about moving out of these two markets you've been in since you started. Mm hmm. And so, yeah, what are you looking at now for the next phase, I guess? You said you have two projects that you're wrapping up right now? Is that what I heard? 

[00:18:24] Drew Pierce: I'm working on a project right now.

[00:18:26] Drew Pierce: It's actually in the Smoky Mountains, but it's a glamping resort. That's where I see everything is moving towards, and honestly, that's going to be a very short window of opportunity. Because on those properties, for example, my cabins in Tennessee, they're studio cabins, 600 square foot cabins. Those each produce anywhere between 80,000 to a hundred thousand dollars a year.

[00:18:46] Drew Pierce: They're in the Smoky Mountains. These tents will cost a fraction of that. Okay? My cabins today are worth, I bought 'em for about $200,000 and before they're worth over $450,000 at this [00:19:00] point. Four 50, I can buy a tent, though, completely furnishing everything like that for $45,000. And generate about 50, 000 worth of revenue.

[00:19:09] Drew Pierce: Okay. So that's where I feel the opportunity is currently is in is with the clamping. Sorry. Is 

[00:19:14] Randal McLeaird: it like 

[00:19:15] Drew Pierce: a year? 

[00:19:15] Randal McLeaird: What is this thing? 

[00:19:16] Drew Pierce: No, it's, it's canvas safari style tents. Okay. That's what I'll be doing with them. There's a company I use called, uh, Yala, the distributor I'm working with is tent masters, but they're very high ends.

[00:19:30] Drew Pierce: Tents. So they're not like your Coleman tents. 

[00:19:32] Randal McLeaird: Sure. Right. They're 

[00:19:33] Drew Pierce: specifically made. So I just. I have an amazing experience. So you go in there, it'll be like wood floors on it. It honestly, it's like a cabin, but with canvas walls, like it has AC, a little kitchenette in there and things like that, the only thing that's not going to be provided is I'll provide internet, but probably not the TVs.

[00:19:50] Drew Pierce: Yeah. Type of a thing just to make it so. Yeah. Use your 

[00:19:52] Randal McLeaird: phone. Use your, uh, your tablets or whatever. Yeah. Yeah. 

[00:19:55] Drew Pierce: Use that if that's what you really want to do it. But the whole point of it is to. Yeah. People are [00:20:00] there to enjoy the nature with still the creature comforts. Yeah. And so that's kind of the idea behind it.

[00:20:05] Randal McLeaird: Ages ago, my, I took my son, he was a two and I took him to locally here in San Antonio A lady had a yurt. I mean, it was like one of those domed things, right. And it was an Airbnb, it was set up on there and it was awesome. It was very cool place to go hang out. So I kind of have an idea, but be curious to see what those are that you're talking about.

[00:20:24] Randal McLeaird: So honestly, like I have a lot of people on and they don't go through and break down everything like you've just broken down. And so I appreciate the willingness to share and like, Hey, this is what I'm doing. This is exactly the platforms that I use. So maybe let's talk a little bit more about that, like how you have structured this thing and what you're looking to get into, right?

[00:20:45] Randal McLeaird: Is the glamping, is that the property that you're working on? Are you trying to have five of these tents set up on one property? Are you, you know, like, what does that even look like? 

[00:20:54] Drew Pierce: So I guess to give you a breakdown of where the project and everything that is coming from. So I bought 42 [00:21:00] acres worth of property.

[00:21:01] Drew Pierce: It's one of the only places left in all of the entire Smoky Mountains of Tennessee that you can buy any piece of land with it. So ever. And right now we're having a battle with the government there. It's on county land. And I just know the local government there is getting involved in trying to limit the number of properties that we can have on it.

[00:21:21] Drew Pierce: And so that's kind of the headache that we have right now with it, is that they're trying to tell us we can only have 31 units on this, which is obviously just 31. 31, 

[00:21:29] Randal McLeaird: okay. 

[00:21:30] Drew Pierce: Yeah, on 42 acres, so obviously less than an acre per tent, or more than an acre. Yeah, yeah. And that's just absurd. So we're trying to figure out what to do.

[00:21:38] Drew Pierce: And at this point it's trying to find the right team. I have a really good GC. He's the number one GC developer in the area, but we're having a hard time finding an attorney. Like and make this work for us. I'm the only one coming with ideas We're going through on our third attorney now, you know, I say like why don't we do this?

[00:21:55] Drew Pierce: Like, oh, I don't know and this is outside their expertise And so they recommend me to someone else and they don't know [00:22:00] anything about it So they i'm just getting shuffled around with it to try and figure out What we can do. So like, I've had a couple of ideas, like one of 'em was just like, Hey, let's get like, what's the smallest amount of land that we can legally build on?

[00:22:12] Drew Pierce: Right. Put a permanent structure on it. Is it like a 10th of an acre? If so, then let's do that. And then that way we can have like 200 tents on there type of thing. Mm-Hmm. . And make it grow that way. Or if they're really gonna say, no, that won't work, and they say, okay, well Airbnb, one of the common things on there is that you can rent out room individually.

[00:22:27] Drew Pierce: So the government there is like, I'm just gonna put 31 large cabins on it. And then basically rent them out as a boutique hotel, where it's just like, all right, each of these Airbnbs are going to have 20 bedrooms and people can rent them out individually. If you want it to be an indoor pool, it'd be really nice and things like that.

[00:22:44] Drew Pierce: You know, sell it more as that. So, I'm just trying to figure out what is the best way to do it. 

[00:22:49] Randal McLeaird: Yeah. 

[00:22:49] Drew Pierce: And, uh, putting together the right team for 

[00:22:52] Randal McLeaird: that. Yeah, that's awesome. So, all right, so 42 acres, you bought it. How did you know that this was going to be? One the spot and like [00:23:00] going into it knowing these challenges because land development in general is.

[00:23:05] Randal McLeaird: In a county most of the time if it's unregulated, you can do whatever you want. So, right. When did this become an issue? 

[00:23:11] Drew Pierce: So we did a lot of research before we even got started 

[00:23:14] Randal McLeaird: Sure. 

[00:23:14] Drew Pierce: To figure out. And, uh, they said, everyone I talked to said the same thing as you. Like, there's a lot less regulation when it's owned by the county instead of the city.

[00:23:21] Drew Pierce: So that's specifically why I bought this land. 

[00:23:23] Randal McLeaird: Yep. 

[00:23:24] Drew Pierce: Was for that reason. And the regulation didn't come, government didn't start stepping in until we were starting to get approval for things like the. Utilities and getting all that stuff set up and trying to figure it out. Because there's already like a piece of road going through it.

[00:23:38] Drew Pierce: It was a failed development number four. And so it was supposed to be a, a quick project, but it hasn't turned out to be that easy, but, uh, we'll figure it out. But that's when the regulations, the government started stepping in was after we already purchased land in full and said, we're going to limit you the number of units that you can have.

[00:23:59] Randal McLeaird: Do you [00:24:00] know what, like, what's your break even number of units? Like how many do you need to make the project work? 

[00:24:04] Drew Pierce: I mean, I will break even at the 31 units because the margins are so high. I only won those 42 acres. I only spent 585, 000 on it. 

[00:24:12] Randal McLeaird: That's awesome. Yeah. 

[00:24:14] Drew Pierce: So, and like I said, there's the road itself that was put in the middle of it.

[00:24:17] Drew Pierce: What did it cost a million dollars anyway? So we got a real bargain. So there's a, like a paved road. Yeah. There's a paved road with a curbs and. Oh, wow. All that type 

[00:24:27] Randal McLeaird: of stuff. Oh, okay. So, there's no gutters. Yeah, no. I'm picturing like a rural piece of property that has no development on it whatsoever. Did they already put utilities in the street?

[00:24:35] Drew Pierce: No, utilities aren't in the street, so that's the only thing. So, there's a paved road there and it's curved, but there's nothing else to it. 

[00:24:42] Randal McLeaird: Yeah. 

[00:24:42] Drew Pierce: So, it's somebody who had a grand idea that they were going to put cabins up there, and then it failed. And so, now they're just selling the land. Hmm. Wow. 

[00:24:51] Randal McLeaird: So, why did the first one fail?

[00:24:53] Randal McLeaird: Same reasons? Uh, no, they couldn't raise the money. Got it. God, that's crazy. Put the damn road in and not [00:25:00] have, not have the capital. 

[00:25:02] Drew Pierce: Yeah, I don't understand that. Why get started with it if you don't have the money in place? Yeah. It is what it 

[00:25:06] Randal McLeaird: is. Let's talk about the project then. Let's assume that you're gonna get three per acre or whatever it is, right?

[00:25:11] Randal McLeaird: So you get a hundred something units in there. Whatever that number turns out to. What's the total project cost you're estimating and how are you structuring the deal like for investors? How much capital you trying to raise like where are you with that? 

[00:25:23] Drew Pierce: Sure. So right now it's set up to be a waterfall syndication So it's gonna be I guess just for your listeners who don't know what a waterfall syndication is It just means basically you have to hit hurdles.

[00:25:34] Drew Pierce: There's like three different hurdles on mine and you have to hit so like Me as the GP, the general partner will get 10 percent of the profit and then the investors will get 90 percent of the profit. Obviously that how much of that 90 percent they get depends on how much money they put into the pot and the investors have to get a certain return first.

[00:25:53] Drew Pierce: And that depends on the level of investment they put in. So obviously you put more money into it. You're going to get a higher return on that [00:26:00] first one. So. That goes there and then it goes into the second pool, right, or the second hurdle you have to go into and then that's with, uh, once they get their money back, basically.

[00:26:09] Drew Pierce: So they have to jump that hurdle every single year and then the second pool will continue to fill up until they've gotten a full return on their investment plus the hurdle. Preferred. The first one. Okay. And then on the third one, right, then it's just a revenue split. So it'll be, again, depending on how much money they've invested, you know, 70, 30 or 90, 10, whatever.

[00:26:29] Drew Pierce: And obviously every waterfall syndication is going to be a little bit different, but that's how it's set up for us right now. 

[00:26:35] Randal McLeaird: Yeah, yeah. Okay, so do you have investors in the deal? What type of offering is it? Or did you pay cash for it yourself? 

[00:26:40] Drew Pierce: I have investors to pay for the land itself. 

[00:26:43] Randal McLeaird: Okay. So I've raised in 

[00:26:44] Drew Pierce: total about, uh, 450, 000 for it.

[00:26:49] Drew Pierce: And then, well, I mean, technically I've raised 750, 000, but that was just to get the deal rolling. He wants half of his investment back. Okay. 

[00:26:56] Randal McLeaird: Yeah, 

[00:26:56] Drew Pierce: where he was just, uh, to get it going. But, but that's where that right now. [00:27:00] I, I put a pause on raising capital until I figure out the government situation. Sure.

[00:27:05] Drew Pierce: Once I know, okay, look, we have, I'll make it work regardless of what's happening, but. I gotta figure out which route I'm taking. Do I need to take the Bacik Hotel route, or am I going to be taking the 200 tents type of route on this? It just depends on what I can do, how I can skirt around things to make the deal work.

[00:27:26] Drew Pierce: And so once I have that nailed down, then I'll be going heavily back into capitalism. 

[00:27:31] Randal McLeaird: So the initial capital that you have, it's not syndicated. It's really just like, Hey, it's a partnership type deal until you actually have the plan in place. Is that correct? Until the 

[00:27:40] Drew Pierce: syndication is, is like, okay, then they go into the syndication.

[00:27:44] Drew Pierce: But yeah, as of right now, it's just like, Hey, thanks for your money. We'll get this deal working. 

[00:27:49] Randal McLeaird: Yeah. The reason I asked, cause I didn't want to talk about the returns. If it was like a five or six B that you had already launched and it's like a private deal where you're not supposed to talk about it. So since it's not It launched, [00:28:00] then I want to talk more about the waterfall structure that you have envisioned because so it sounds like, again, if you're listening and you don't know what a waterfall return profile is, maybe I should do another episode on that just because I've been talking about this, but it sounds like you're structuring it as you have a preferred return.

[00:28:14] Randal McLeaird: Right? You have a 10 percent promote to you, the GP. Meaning that regardless, like you're going to get, as long as you hit the numbers, you're getting 10 percent of the return for putting the whole thing together and structuring it, that's just your promote on the deal. But the pref is set up to where you're paying that back.

[00:28:29] Randal McLeaird: No matter what, first, the investors are getting their pref before you ever get into your promote, correct? 

[00:28:33] Drew Pierce: So it's set up to where it's for the profit. So it's just whatever the profit is. So if there's a million dollars in profit, 900, 000 goes to them, 100, 000 goes to me. 

[00:28:41] Randal McLeaird: Got it. Okay. So there's no preferred return until you hit a hurdle.

[00:28:45] Randal McLeaird: So what are the hurdles based on? The first one is 90, The second one is once I return all your capital on an ongoing basis 000, 10, 000 split, then it switches? 

[00:28:57] Drew Pierce: Yes. And then it switches. It'll still be the 90, 10 [00:29:00] until they get their preferred return, which is somewhere between like eight and 12%. I'm trying to remember off the top of my head what it is.

[00:29:06] Randal McLeaird: Okay. Okay. 

[00:29:07] Drew Pierce: And then, yeah, for the last thing, obviously sometimes it's, it's like 70, 30, 75, 25 and 80, I 

[00:29:15] Randal McLeaird: believe is, 

[00:29:16] Drew Pierce: is, is for the third tier. 

[00:29:18] Randal McLeaird: All right. So yeah, you're structuring that. I just didn't know what metric you were using to what hurdle rate it was. A lot of people use IRR, you know, it's like once we hit a, you know, 10 percent IRR, we're going to change over to, I get 50, 50, right.

[00:29:30] Randal McLeaird: We're going to split. So it sounds like once you return all the capital, that's when it's your trigger for you to go into the next phase of waterfall. That's awesome, man. I mean, that project sounds awesome. One thing I love about the vacation rentals and the, and the whole setup is one, it's like so much fun to go to those things.

[00:29:45] Randal McLeaird: And, you know, it's like. So now you have a place to go. I love that aspect of it, but it's also a very cool project. So like, I've looked at very similar things here locally. There's been like 60 acre tracks on waterfront that I've been looking at buying water was an issue. Streets [00:30:00] were an issue challenges, like all the things, but I've like gone down that road.

[00:30:04] Randal McLeaird: And so the fact that you're doing it is super cool, man. I want to know how that thing works out for you and hope that you get the most units you possibly can to make an awesome venue that people can go to, you know. Do you have a preference? Are you like, I would love to have a boutique hotel or is it like your vision is more along the lines of the tents?

[00:30:24] Drew Pierce: You know, I'm open to either, but really the vision started off with being a glamping project. And I think I'd like it to be, be with that. I mean, they're both fun. I like, I plan on going into hotels eventually, but I'm kind of more leaning, I guess, towards the glamping because that's. There's just a window of opportunity.

[00:30:41] Drew Pierce: You have to do it where it's like in a, your national park. Like, you know how I explained earlier, right? The, I go through 900 markets and this and that. I went through a similar process with that. Yeah. I'm figuring out where did it go for glamping, but I only had like 50 or something like that in my list to go off of great places to do this at, just because I'm, you know, I'm [00:31:00] not an expert in every single place you could possibly do a glamping resort.

[00:31:02] Drew Pierce: So I'm going mostly off of like state and national parks and you know, which states, which side of the park you're on and things like that. I only narrowed it down to like two markets that were feasible for something like this. And the Great Smoky Mountains was easily the clear winner in this case. So like I said, that window of opportunity for the glamping is closing at least for resorts of this scale.

[00:31:25] Randal McLeaird: Very cool, man. Again, I like projects like that personally, just because I've looked at them as well. So, all right. In your investing career, is this one of the biggest challenges that you're facing now is dealing with this type of issue or have there been other issues that you've had to deal with?

[00:31:40] Randal McLeaird: Building up your portfolio. 

[00:31:42] Drew Pierce: Oh, there's been issues all along the way. This isn't a new thing, . Okay. So how do you 

[00:31:46] Randal McLeaird: deal with them and what's been some of the ones you've had to overcome? 

[00:31:49] Drew Pierce: So the glamping project is the most recent one, but once before that, it was in like, uh, 2022, I believe. I had a couple investors bought some houses, [00:32:00] and at that time I bought some houses right when the Airbnb bus was just happening, right?

[00:32:07] Drew Pierce: So Airbnb, the summer release. screwed everything up for everybody. People went from being fully booked up or getting bookings pretty regularly, being dead. That's because they introduced categories and it wasn't a smooth rollout. So they were putting people like in New York kind of thing and putting the category of like beachfront properties, you know, and surfing categories.

[00:32:29] Drew Pierce: And so people click categories and it's just taking random places and the conversion rates were super low for everybody. And it was a terrible rollout. And so I had to figure out. What to do with that so I like fasted and prayed and did all these things to help me figure out what the heck am I going to be doing here and I ended up making a few changes With it.

[00:32:50] Drew Pierce: So one of the things they did is they removed titles from their listings and that was one of the things I would do. So like, for example, on my, [00:33:00] the first property I bought in Gatlinburg has a private fish pond. So I'd say 10 minutes to Gatlinburg, private fishing pond. And that drew in a ton of people.

[00:33:08] Drew Pierce: Well, now that was gone. It just showed a picture of a cat. Didn't say why it was special type of thing. And that was the same thing with everybody. And so I said, okay. What am I going to do about this? And I just did research, like I said, did a whole bunch of other things and figured out, okay, the best way to do this actually just to make a new cover photo with those words in it.

[00:33:26] Drew Pierce: And that's what I did. And that's now the new standard that I have in all of my listings. It's our collage of three or four photos type of thing. And then I'll say like, what makes this unique compared to everybody else? And it really stands out from everybody else. I took the old phone book trick where, you know, back in the day, if you want to send out, you put a white border around your company, you know, and that made you stand out from all the other companies in the phone book.

[00:33:49] Drew Pierce: So basically I just did that kind of a thing. At the time people were complaining about cleaning fees. So I just said, no cleaning fees and restructured my pricing strategy. And so I just [00:34:00] did a number of things like that. It really turned the business around because it went from making a certain amount of money each month to just like suddenly being slashed in half everything.

[00:34:09] Drew Pierce: And that wasn't obviously sustainable for me. And so when I did that, these homes didn't do well initially, but I did that recovered everything. And that's just one example, but there are so many examples I could give about. Having to adapt and pivot, you know, in this industry for the last five years. 

[00:34:27] Randal McLeaird: Yeah, that's awesome.

[00:34:28] Randal McLeaird: I, it's one of those things. And I heard you talking about it with the attorneys and the people that you are working with on that other project. You're like, it's not, I can't, it's like, how can I like, there's a solution. Let's go find it. And we're going to work through this and it's going to happen. So yeah, I also appreciate that approach to it.

[00:34:45] Randal McLeaird: And that's the only way really that you, you move forward in real estate in general. It's just like, okay, here's a problem. I got to go solve it. So good for you. What are you seeing in the future? Like you got this one project, right? Five, 10 years out, what are you looking to do? Are you buying hotels? Is that what I heard you say?

[00:34:59] Drew Pierce: Yeah, so I [00:35:00] think what I'll do is I'll turn right now, my vacation rental portfolio is like a one to one type of thing. I think I'll eventually turn that into a fund. Okay. And do it that way and really focus on that. Maybe doing franchising with it as well. And turn that into a much bigger thing. But there's numerous things I want to do.

[00:35:18] Drew Pierce: Hotels is one of them. Maybe condo tells. And then traditional hotels and resorts, and then also doing, I'd love to do a theme park actually one day. Oh, nice. As well. 

[00:35:29] Randal McLeaird: That's very cool. Yeah. I had a coach a long time ago. And he's like, what do you like doing? I was like, I love sports and real estate. And he was like, once you have a sports themed based like extreme sports, and he's like, have a hotel where people can come base, jump off the roof and at the same time, you know, climb through or whatever.

[00:35:47] Randal McLeaird: I was like, it's a great idea, man, hasn't happened yet. But I liked that idea. Do you know, you mentioned funds in Europe and Utah, you know, Bridger Pennington. 

[00:35:55] Drew Pierce: I know of Bridger. 

[00:35:56] Randal McLeaird: Okay. Yeah. I didn't know if you had like joined this group in order to, to launch a [00:36:00] fund or to learn about funds or whatnot, but he's in your, in your neck of the woods, man.

[00:36:04] Randal McLeaird: So, well, Hey, it's been good catching up. Like I, again, from the very jump of this conversation, you are like dropping knowledge. Hey, here's how I do it. And here's how it works. So. Yeah. I appreciate that a lot because I'm sitting over here, I've got a whole pad of notes that I can easily go to each of these platforms and things that you mentioned.

[00:36:21] Randal McLeaird: And now I can go straight to them and be like, okay, is this something that I would ever implement and use? And how could I piece this together and make a business out of it? So again, really appreciate you jumping on, sharing your information about your business, what you're working on and that sort of thing.

[00:36:32] Randal McLeaird: Ton of knowledge that you have there. If you are interested, you're looking to invest, or you want to reach out to Drew directly, all his contact info is going to be in the show notes and you can do that. And yeah, Learn more about what he's working on and see if you want to invest in some of the projects that he's got going on.

[00:36:47] Randal McLeaird: So thanks again, man. Jumping on. 

[00:36:49] Drew Pierce: Thank you for having me. 

[00:36:50] Randal McLeaird: Did you know that 80 percent of the agents we speak with got into real estate in order to gain passive income so they could obtain financial freedom and become work optional. If you want to stay up to [00:37:00] date, the best way is to make sure you're subscribed.

[00:37:02] Randal McLeaird: So if you haven't done that, go ahead and do it now. We'll catch you on the next episode. 

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