January 21, 2023

JF3061: Short-Term Rental Management Strategies ft. Leslie Anne Morris

Leslie Anne Morris is an investor and short-term rental property manager focused on creating a passive income source for out-of-state investors. In this episode, Leslie discusses managing short-term rental properties in the Smoky Mountains, navigating the different levels of expectations between short-term and long-term renters, and how she is currently structuring the financing for her properties.

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Leslie Anne Morris  | Real Estate Background

  • Investor and short-term rental property manager in the Smoky Mountains focused on creating a passive income source for out-of-state investors who want to build a life apart from trading their time for money.
  • Portfolio:
    • 11 short-term rentals in the Smoky Mountains, one new construction
    • Passively invests in women’s multifamily syndications
  • Based in: Smoky Mountains, TN
  • Say hi to her at: 
  • Greatest Lesson: Take action. Stay in your niche and don’t spread yourself too thin by investing in too many markets at once.



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Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed and I'm here with Lesley Ann Morris. Leslie is joining us from the Smoky Mountains in Tennessee. She is both an investor and a property manager in the Smoky Mountains, focused on creating passive income sources for out of state investors who want to build a life apart from trading their time for money. Her current portfolio consists of 11 short-term rentals in the Smokies, one new construction house, 100% owned presently by her. She also does some passive investing in women's multifamily syndications. Leslie, can you tell us a little bit more about your background and what you're currently focused on?

Leslie Anne Morris: Sure. I had about a 25-year career in commercial banking, and climbing the corporate ladder is an admirable thing to do with your time, and I kind of just got to a point where I just wanted to work for myself, and I didn't really know what that looked like. And in the back of my mind, I always knew I wanted to invest in real estate; just being in commercial real estate was a big portion of what my career was. And I had a lot of clients that would mentor and coach me. So I finally got to a point when I was living and working in Los Angeles where I started to do just that. And I looked at a lot of different avenues, and picked the best one for me. It was a long-term rental, and the whole deal just fell apart overnight... So lo and behold, I ended up investing in short-term rentals, and I ended up investing in Smoky Mountains. It's kind of a beautiful story of not being able to afford anything in LA. I looked at Palm Springs and those markets and I was just priced out of that, so I just kind of did some research and came upon the Smoky Mountains all by myself... And just self-educated and relocated to Tennessee in 2020, and then just recently left my job in banking just this year in September of '22, and now I'm a full-time investor/agent/property manager, and just trying to become an industry leader in the field. That's kind of where I'm at.

Slocomb Reed: Are you exclusively focused on short-term rental management?

Leslie Anne Morris: Yes, so I'm the owner and founder of Josh's Cabins. Josh is one of my business partners. And that is focused solely on cabins. We cover [unintelligible 00:03:32.07] Pigeon Forge, Gatlinburg, and Townsend, all in the Smoky Mountains.

Slocomb Reed: For those of our listeners who are likely not familiar, can you explain where the short-term rental demand comes from in the Smokies?

Leslie Anne Morris: Sure. It's phenomenal demand. It's one of the most heavily touristed areas in the United States, simply because we have the Great Smoky Mountains National Park; it is the largest and -- I don't know if it's the only free park, but it will be free until the end of time. That's just the way it's grandfathered in. So because of those reasons, because of the park, and it's free, we had 14 million visitors last year. Of course, that was a COVID year; this year we're on track for about 13 million. And those visitors are all coming, mostly driving in, and the statistic is that about 60% of the United States population is within an eight-hour drive or less. So that's where the demand is coming from.

And the Smoky Mountains is primarily a tourism market, so I think entrepreneurs like me saw opportunities because of the high visitation. A lot of tourism things are opening, so [unintelligible 00:04:41.00] on a Jack Daniels distillery there in the market, and then we also had [unintelligible 00:04:44.20] open a 43,000 square foot gaming and food facility. So just a lot of really good reasons, really compelling reasons for folks to travel there, and also just the mountains are beautiful, which is why I ended up moving to Tennessee, just to be closer to that.

Slocomb Reed: Leslie, you know better than I do, but I am somewhat familiar with the area... There's more to it than just the National Park though, right? The first thing that comes to mind for me is Dollywood.

Leslie Anne Morris: Yes. Dolly Parton is amazing. She just hit most influential women's list... She should have been number one. I think she was number 97... But yeah, she does have Dollywood there. Dollywood is huge. There's some other amusements parks there, and there's actually a new one that a French company is getting ready to break ground on. I think they're still in the planning stage for that.

Yeah, there's tons of reasons. I think there are families that come there primarily for something like Dollywood, but I think originally, at the beginning of time, it was the park. So that's in my mind what I think of. And there's ample opportunities to see wildlife. A lot of people are driving from cities, and also hiking, there's waterfalls... It's just a beautiful place to spend time with your loved ones.

Slocomb Reed: On this subject, I am an apartment owner-operator based in Cincinnati, Ohio. My wife is from Knoxville, so she loves the Smokies. We have enjoyed vacationing there a couple of times. But last question on this - do you consider Norris Lake to be part of the Smokies?

Leslie Anne Morris: No, that's a little too far North. I do own a cabin on Douglas Lake.

Slocomb Reed: Gotcha

Leslie Anne Morris: That's a little closer. And parts of Douglas Lake are in [unintelligible 00:06:22.20] County. So if you were looking at purchasing property there, I'd look on that side. I think that cabin's about a 25-minute drive to Dollywood; it's a little bit further out than you would want to target. Would I recommend it to my clients - I wouldn't recommend buying that, but it is a beautiful cabin with lake views.

Slocomb Reed: So painting the picture here for you before we transition the conversation - 60% of the US population living within eight hours, and in your region you have wildlife vacationing, wildlife recreation, the lake, the National Park, and you also have amusement recreation, you have a lot of family-friendly type stuff, and you have two hour slowdowns on the highway when someone stops a bear. Everyone gets out of their cars to look at bears. That's a true story that happened to me passing through the Smokies one time.

Leslie Anne Morris: [laughs] Yeah.

Slocomb Reed: There are a couple of questions here from your background actually and your investing activity that I'm really interested in asking you, Leslie. I do want to start here - the majority of our listeners are engaged in apartment investing, long-term rentals. And I spend a lot of time talking about the difference between short term and long term rentals with the investors here in my sphere. I was a superhost, 200-something five-star reviews on Airbnb, and I left short term rentals, even though I had prime locations for it, because the business model was so different from my focus, which was long term. I'd like to set you up to talk about that and talk about how your management operates by saying that short term rentals are not landlording. They are hospitality. The people who are staying in your places are guests, not tenants; they have a very different level of expectation, and you have to interface them in a very different way. For those of you listening and not watching on YouTube, Leslie is nodding her head a lot while I'm saying this. I want to set you up to tell me why you're nodding, Leslie. How has your experience gone with that?

Leslie Anne Morris: No, that's huge for me right now. And I'll tell you, I'm actually writing a book. If you're either a newbie investor or you're like you, you're in apartments, you're in long term rentals, your mindset is completely different. Your strategy is completely different. The deals you're looking to take down are just completely different. When you think about partners, that's completely different.

So yeah, I'm writing like a strategy playbook on how to do it to scale... Because a lot of people think they're gonna buy one of these things and be like, "Oh, I own an Airbnb", and put it on Airbnb and self-manage it, and it's just gonna make a killing, which - can that happen? Yes. Does that happen with most people? No. It's a lot of work.

I think the biggest difference for me going into this is the fact that you've got like, to your point, guests; you can't just ignore them if something's going wrong. When you have a long-term tenant, and maybe something's leaking, you can tell them to shut the water off, somebody will be there tomorrow, but that just doesn't work when a guest is spending thousands of dollars to make memories in your beautiful vacation home.

We get anywhere from seven to eight turns per month, so seven to eight different guests per property per month. That's a huge volume. And when I think about the definition of long-term versus short-term, we don't rent anything over 14 nights. We don't want to get into the landlord tenant laws. We have a completely different strategy; if something goes awry, the sheriff can pull these people out of these homes. It's very, very different.

So it is a different mindset, and when you made the comment about that wasn't your strategy, so you moved away from it to focus on what your niche is- that's what I recently decided. Because I did have some long term rentals, and 1031-ed out of those into more cabins. That was one of my scale strategies for 2022, and it worked beautifully. But it is not for everybody, but it does have better margins. Cash on cash for me is a minimum of 20% on all of my deals. So different strategies for different people. But can you do it? Can you do it successfully passively? Yes. The answer's definitely yes on that.

Slocomb Reed: Leslie, when we started the interview, you were talking about your corporate career pre real estate, 25 years in commercial banking. Now that you're focused on short term rentals, your experience with commercial banking - is it influencing or directing the way that you structure the debt for your properties currently, or the way you plan to structure debt for your deals in the future? ...as it sounds you'll be raising capital to buy more properties.

Leslie Anne Morris: Yes. Short answer - yes. Right before I started investing in real estate, I actually also started a master's degree at the University of Southern California. So I would say not just my long banking career, but also that master's degree - everything just funneled beautifully into what I was doing. So I'm not just a passive investor; I do own the property management company that manages my rentals, but I got to a point where I was forced to create that company out of a need for a quality of life; hence why I'm focused on creating a strategy for investors that want to be passive in this game.

But yeah, definitely. I would say, really early on in the real estate investing, I wasn't doing the type of credit underwriting that I'm doing today. I honestly thought this would be a basic hobby for me, and I would buy a cabin and I could go vacation there myself, my friends and family could come with me, or whatever. So I just, in my mind, when I started doing that, was "I have the money, I can afford the debt service on it, even if it doesn't make a dime." I had a very high-paying job. So that was my peace of mind going into the first couple of deals. But then I quickly realized, "Whoa, this is a business", and it just completely shifted my mindset within just the first few months.

So now I'm not calculating any kind of cap rate, because it's single family, like I would with my other bigger deals, but on these deals specifically I'm looking at NOI, and I'm looking at cash on cash, and I'm making sure that I'm hitting 20%. But my early deals, if I went back and underwrote them the way that I'm doing deals, 11 and 12 today, those were at 60% cash on cash. So if a savvy investor like yourself would have saw what I was getting into, you would have been like, "Was this just dumb luck?" It's like, no. I was always meant to do this, and I had that credit underwriting background, and I guess the will to succeed... But that kind of always was a part of who I am as a person.

Break: [00:13:09.26]

Slocomb Reed: A couple of follow-up questions here, Leslie... I want to ask you about the way you're structuring your equity partnership with the investors that you're bringing on. Before we get to that though, now that while you're beyond 10, I know that your first 10 deals, speaking very broadly, would have qualified for residential 30-year fixed conventional financing; moving forward, or possibly currently, how are you structuring the financing for these properties now?

Leslie Anne Morris: Yeah, I hit a cap on your 30-year awesome mortgages pretty quickly... So what I started looking at doing was your DSCR, debt service coverage ratio loans, your basic asset-based lending. So that's a lot of what I do today. A lot has shifted in just the last few months, so terms, rates, structures are not as favorable... So when I hit that point of realization on that, that this is cutting into my margins, I started looking at local community banks that had similar loans to the type of loans that -- I was doing $50 million deals. I wasn't financing cabins, but I found a banker that was similar to myself at a commercial bank, local in the Smokies, and started doing some commercial financing there.

There's a drawback to that, because they still are going to heavily scrutinize your global cash flow. So they're looking at every single thing you have your hands in, and then they're primarily looking at a five-year fixed rate, amortized over maybe 20 or 25 years. Whereas these debt service coverage ratio lenders allowed me to put in 15% cash, and was still a 30-year fixed, and they even offered 40-year fixed, and they could go interest-only... I mean, there was a lot of savvy different structures that they offer.

There's lots of different things I'm looking at. I'm even looking at - to get away from some of this more expensive lending, I'm restructuring things, moving things into LLCs when it makes sense, and freeing up some more conventional slots. So I'm hoping to look at that possibly next year.

Slocomb Reed: Gotcha. Now, back to the equity question, how are you looking to structure your partnership with investors?

Leslie Anne Morris: Yeah, so I'm not doing that today. What I'm offering today through the two companies that I own is a strategy where somebody in another state, far, far away from Tennessee - I have clients in Middle Tennessee, actually, that want to own a short term rental, but don't want the headache of management, and want someone who knows every part of the deal. That's what I'm offering today. So you're going to have your name on the deed, and you're going to be the owner, and I will coach and mentor as a part of that.

For instance, I have a client in Middle Tennessee who has a cabin under contract, so I mentored and coached her on what she should buy. I don't sell clients or recommend to clients properties I wouldn't buy for myself. We have pretty strict criteria. And then I coach and mentor them on how to underwrite the deal. And then if they want to self-manage the deal, that's possible; they can do it on the back end, like taking the Airbnb bookings and creating their own direct booking page... I don't recommend that, because if you want to scale it, like I said, it's a full-time job.

So then if they want to look at the property management company I own and become part of that family with their property, that's possible as well. But now we're starting to do listings, too. So then I guess, in theory, if a client decides they want to have a seven-year exit strategy, or whatever, when it starts to get to obsolescence and you're needing to put a lot of maintenance CapEx into these properties - then their exit strategy, so I can help them sell it as well.

So that's what I'm doing today. I do get approached quite a bit about taking in partners... I'm exploring some different options for '23 and '24 that would be more like possibly a fund, or some sort of partnership with folks. But at this point, I haven't had to do that; I'm just using all my own money, just for my own deals.

Slocomb Reed: For your own deals you're using your own capital, and then what you are offering to those non-local investors is the opportunity to work with you to identify opportunities, acquire them themselves, and then either self-manage or hire you for management?

Leslie Anne Morris: Yep, that's it in a nutshell. So I'm basically acting as an agent. I think what makes me different from most of the other agents in the Smoky Mountains is I have a pretty sizable portfolio. I'm doing it very successfully to scale. And then I was running into a problem too where I had clients that wanted to buy a property, but then "Who do you recommend for management?" and I just couldn't -- I already had this management company, but I wasn't really taking on other units. It was just my own units. So then I opened that up; we got fully licensed and insured to open that up at the beginning of '22. So now we are able to offer that. I just kind of looked at what are the weaknesses from other companies, and how can we mitigate and address those weaknesses. So that's kind of the playbook that we have there.

Slocomb Reed: I did something very similar in Cincinnati, Leslie. I'm focused on long term rentals, as you know, and as my portfolio grew, I needed to start my own management company for my own portfolio; mine and the stuff I have with partners. I "came up" in real estate as a house hacker and a residential agent helping people buy their three families, their four families, sell their flips, things like that... And out of not having management companies that I could recommend, I've ended up taking on some third party clients here in Cincinnati as well for long term rentals specifically.
Great. Well, Leslie, are you ready for the Best Ever lightning round?

Leslie Anne Morris: Yes.

Slocomb Reed: Awesome. Let's do it. What is the best ever book you've recently read?

Leslie Anne Morris: Well, I always want to say Rich Dad, Poor Dad, but I know everyone's read that. And if you haven't, read it. I am currently reading The One Thing by Gary Keller of Keller Williams. It's pretty awesome. It's like, what's that one thing that you could do, that could make everything else easier, better, faster, stronger? So I haven't finished it yet, but it really just cuts to the chase, which is kind of like how I operate; I make a strategy and a plan, and then I just execute quickly, and I get to that end goal. So that book is really resonating with me.

Slocomb Reed: Nice. What is your best ever way to get back?

Leslie Anne Morris: Yeah, I have some exciting stuff coming next year. But my why, of why I'm doing all this is I want to be the one to attribute the creation of 1,000 women millionaires through real estate. So I want to empower and coach women to not take over the world, but take over their lives, take over their financial freedom. I heard a statistic that only 31% of investors are women. So I'm looking to change that, because I think it was Andrew Carnegie that said 90% of all wealth is created through real estate. So we have a little bit of disparity there, and I'm looking to shorten the gap.

Slocomb Reed: Leslie, you made mention of a mistake early on in this conversation... Thus far though in your real estate investing career what is the biggest mistake you've made, and what is the best ever lesson that resulted from it?

Leslie Anne Morris: Yeah, I think in life mistakes are always just opportunities to learn. I would say that -- I never have had a deal that lost money per se, knock on wood... But I did have, during the heyday, the pandemic heyday, where everybody was buying everything and going crazy, I did pivot into a couple other markets, and for a while I had Airbnbs in three states, and now I don't. I'm only in the Smoky Mountains. They made money, that was fine, that wasn't the issue. It just spread my team thin, and it made us have different strategies in different markets where we only had one unit in Florida, one unit and Alabama; it just didn't make much sense to do that.

So my pivot was less than a year later I 1031-ed out of the Florida property, acquired a cabin, and then I have a long term tenant in Alabama. And I think the lesson there for me in particular was when you have something that's going successfully, you should go super-hard in your niche. And that's just a part of the book that I'm working on, which is how to do this to scale. So why not - if you've got the team built out, you've got the strategy built out, and all the metrics, because you've already done it multiple times successfully... Why wouldn't you continue to keep going hard in your niche?

Slocomb Reed: Absolutely. On that note, what is your best ever advice?

Leslie Anne Morris: Take action. Don't underwrite 1,000 deals and keep looking at a million properties. Narrow your focus into what excites you, really go for what excites you, and then stick to your criteria and get that thing under contract. Get a good team and take action.
Slocomb Reed: Where can people get in touch with you?

Leslie Anne Morris: Instagram is the biggest one, and my handle is @Leslie.anne.morris. And on there I have a link and you can get to my portfolio, you can see articles I'm writing on the blog I have with Bigger Pockets, and also my company's websites are on there as well.

Slocomb Reed: Great, and those links are in the show notes. Leslie, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show. Leave us a five-star review and share this episode with a friend who you know we can add value to through this conversation. Thank you, and have a best ever day.

Leslie Anne Morris: Thank you!

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