0:08 You know what I've been doing on my weekends? Looking at rental properties. Now, I own my own home. So why am I looking at rental properties?

0:19 Well, I'm looking at these properties to add to my Airbnb portfolio. And here's the thing, I'm not buying them, right? I'm renting them. I am renting them to rent them out again.

0:43 And as I've been going through this process, I've been thinking, do you know what? I need to do a podcast about this because this... How I'm thinking about my Airbnb portfolio is how you should be thinking about your inventory. Because the decisions that I'm making about which properties to take on, well, they are the same decisions that you should be making every single time you place an order.

0:59 And most retailers aren't doing it this way. So today I want to break down what hunting for an Airbnb property has taught me about smarter inventory buying. There's nothing like a podcast that is telling you about my life. that is bringing it all back to me to help you.

1:17 Am I right? Does this sound a little bit narcissistic? Because if you have ever bought stock because you loved it or because it felt safe or because the sales rep was really persuasive, you are going to enjoy this podcast. And I'll tell you some of my stories about Airbnb rental hunting.

1:39 It's been a very long time since I've been in the rental market, 23 years, I think it was. So yes, it has been very, very you eye-opening. So welcome to the Bringing Business to Retail podcast, where we talk all about solutions and strategies to make your retail or e-commerce store more money. Okay, let me set the scene.

2:01 During the week, on a Thursday, all of the properties that are going to be available to inspect over the weekend come up on the real estate sites. Now, I know it's a little bit different in America, but here we have two main websites. And so on a Thursday in the afternoon, they put them all up and then on Friday, they set the times. Add them into your little calendar and then you go and inspect them.

2:23 You get 15 minutes. You go and inspect them and if you like them, you put an application in. Now, I will tell you, I ride my bike to look at these places. I'm very lucky that they're close to me, but I don't know how you could possibly get to most of these places if you were driving a car because where they are, there's like no parking.

2:49 But I'm thinking, I just get on my e-bike and off I go to have a look at them. I'm looking for properties to add to my Airbnb business. So I do have some properties that I own, oh, my husband and I, we own outright that we do Airbnb, but there's a lot of money tied up in that. There's a lot of money to buy a property and to fund everything that goes on with it.

3:02 So if there is a problem, I have to fix it. Are there taxes? I have to fix it. But if I don't buy that real estate and I rent the properties long-term, I furnish them and then I rent them out on a short-term basis to guests.

3:23 I'm just going to say, I'm going to say Airbnb, but some of the properties that we do rent out, they're like three months to executive properties, but it's just easier. You know, isn't there a world where you kind of long for a tech platform that becomes a verb? Like we Google something, we Uber somewhere, we Airbnb something. I feel like that means you completely made it.

3:41 So I'm just going to use this generic term of Airbnb, meaning short-term rental. So I'm looking to rent properties long-term and then rent them out to guests. Now, you'd think that because I'm not buying, the stakes would be lower. But here's what's interesting.

3:55 The decision-making process is actually very different to buying. Because even though I'm renting, I'm... The one thing that is the same. is I'm committing capital.

4:20 I'm still taking on risk and I'm still locking in costs. And if I pick the wrong property, it's a problem if I buy it, but here's the flip. If I pick the wrong property and I rent it, then my risk is a lot lower. So yes, I still have to fork out the cash every month for the rental, but I don't have the huge overhead of a mortgage.

4:31 Like the worst case scenario. This is Sydney. I just rent it out to a long-term person rather than a short-term person. I take the furniture out and rent it for whatever it's costing me.

4:48 The risk is not that huge, but there are still decisions that are the same, but the risk is different. So what's this got to do with retail? Because this is what happens when you buy the wrong inventory. Now you may not own the building, but you own the stock.

5:00 And if it doesn't move, you're stuck with it. It ties up your cash. It eats into your profitability and no amount of, but I got a good deal, will change that. I feel like I'm getting a little bit muddled up here.

5:28 Trust me, stick with me on this one. Let me walk you through how I'm evaluating properties and how I think you should be evaluating every single product that you bring into your store. So the first thing I have to look at is managing risk. And for you, what that looks like is indent orders or paying up front for something that might arrive weeks or months later versus stock that is available to sell.

5:41 So when I am looking at a property and it comes to options, option one is buy them. And the good thing about that is I get long-term growth. I get equity. I appreciate it.

5:54 I get higher potential returns on the back end. But it also means I'm responsible for everything. Maintenance, repairs, taxes, market fluctuations. It's a huge investment upfront.

6:07 It is a huge commitment. is high risk, but it can also be very, very high reward. And I have made millions of dollars from property. I've also had some property that hasn't quite worked out.

6:25 So option two, when it comes to my Airbnb properties, is to rent them. The downside of this is I only get to keep a portion of that rental. I have to pay someone to do the cleaning. I have to pay for the linens and all the things that come with it.

6:34 I have lower returns. I don't have the equity. Like at the end of the day, if the owner decides not to renew the lease, I just walk away. I've got nothing.

6:52 This is purely cashflow. But on the positive side, I've got fixed overheads. I know what I have to pay for every turnover. I have basically no responsibility for the property other than making sure it's clean, tidy, and the residents don't trash it.

7:08 So I know what I am paying. every single month. Now, the difference with buying the property is, yes, I know things like my taxes, but I don't know if the hot water system is going to be replaced. Or I don't know if there's a plumbing leak that I'm going to have to pay for.

7:22 There's a whole bunch of uncertainty there. So when it comes to renting, I have less commitment. I have more flexibility to pivot. Like if things go wrong, I can just rent that out long-term.

7:32 And I know what I'm paying every time. Have a nice and good month. I don't have to worry about anything else. Neither one of those is right or wrong. They serve two very different purposes.

7:54 And the reason I'm doing this is because I believe in diversifying my income and diversifying where that cash comes from. But I have to be clear about which model am I looking at when I'm looking at this property and what the trade-offs are. And this is the exact same decision that you face every time you order inventory. You have two options.

8:14 You indent order. You go in, fingers crossed, and you put a whole bunch of cash up front and you wait weeks, sometimes months, sometimes seasons to get that return back. Or you wait and you buy what is available to sell. Now, indent ordering is committing to stock before it is shipped.

8:28 So you place that order and most of the time you're locked in. And we know why, because the supplier wants to know how much to manufacture and they're using your cash. to pay for that. So most of the time you can't change your mind.

8:53 And if demand shifts and you have over-ordered, you're probably going to be stuck with it. But on the flip side of that, the security is that if it is a bestseller, you have secured as much stock as you can get and the cash comes in. So high risk, high reward, just like buying a property. Big commitment, but potentially better upside on the back end, but you're wearing the risk.

9:05 So the other option is that you wait and you buy stock when it is available to sell or you buy on demand. It's called different things around the world, but you know what I'm talking about, right? Like you ring up the supplier. If they've got the stock, they send it to you.

9:16 So that is stock that is sitting in a warehouse. You can get it reasonably quickly. You can order what you want. You don't necessarily have to worry about ordering in packs.

9:39 Basically, it's flexible and you're not tying up cashflow, which is something that I love, right? I love that you have liquidity. So you don't have to spend that money and have it tied up for three months when you can't be using that money elsewhere. So that's a positive, is that we are just using, we're using liquid funds, but only when we need to.

10:05 And it sounds like the perfect solution, but you and I both know, because we've probably all been here, you might not be able to secure the best colors, prints, or even sizes quite often if... if manufacturers do in-debt ordering and then available to sell. The most popular sizes go first and so you end up getting stuck with what's left. Now that to me is like renting the property.

10:24 There is less commitment, you are more liquid, you have more flexibility, but you're paying for that convenience on the back end. And here is where most retailers go wrong. They treat every product the same way. They'll either indent the majority of their stock because they're worried that they'll miss out and then...

10:49 You can end up panicking if trends shift or if that stock doesn't sell or just when the bill comes in. I mean, most of the time, the bill when you are doing this order is not generally at peak season time and you're ordering for peak season. But in the meantime, you're having to fund this when you may not be the most liquid. So there's a stress there as well.

11:06 I think you should do both. I think if you're a smart data-driven decision maker that you can do both. Those hero products, the ones that you know will sell, the core range that is proven year after year, I'm okay with indenting those. I'm okay with you locking those in.

11:25 But if it's experimental, if it's a new brand, a new print, a new color, or a new trend, or a seasonal product that you're not quite sure about, then maybe you wait. Maybe you buy that as available to sell. Maybe you won't get every color that you want. But you will keep your commitment low.

11:38 You'll be able to test it. You stay liquid. And if it works, then you indent the next season. So the key is knowing which product deserves commitment and which one deserves flexibility.

11:53 But here's the reality. Indent ordering isn't bad. And if you've worked with me, I often have a bit of a sharp intake of breath when you tell me how much you're indent ordering. I'm not saying it's bad, but it is only smart when you are confident in.

12:10 the sell-through. But likewise, buying available stock doesn't have to be the secondhand approach. It's risk management. And if you use both strategically, you'll stop tying up huge amounts of cash on the wrong stock.

12:23 The second point I want to make is if the numbers don't work, walk away. So here's what I'm doing with every property that I look at. I'm running the numbers and I have a spreadsheet that I'm using. It's very ghetto.

12:42 It literally has the name of the property, how many bedrooms, how many bathrooms, whether it has parking. And then I have my golden. So the things I'm looking for, for these properties, are how close they are to the beach, how close they are to the shops, which is pretty much where the beach is. But you could end up further away, but near a beach, but not near the shops.

12:59 So close to shops and restaurants, close to the beach, air conditioning, parking, view, not in that order, by the way. View and proximity are usually the top ones. And I have this little weighted spreadsheet. I'm so nerdy.

13:18 I have a weighted spreadsheet. And so that helps me decide whether I will put an application in or not. When I run those numbers, I will look at, I literally will go and go onto Airbnb, go onto booking.com, go onto VRBO. I will see what these similar properties are renting for.

13:33 Now, my properties are nice. Like I put the money in. And if you've been listening to this podcast for a while, you know that I refresh furniture probably like every two years, not the whole lot, but literally just last weekend, we replaced the dining chairs. We need to stay on trend.

13:44 We need to stay contemporary. People will not pay a lot of money if the property isn't up to their standards. And so I'm looking at that. I'm looking at what are the costs going to be to clean it?

14:04 What are my platform fees going to be? How much is it going to cost me to recoup my money on furnishings? Because again, I have to sit down and work out if I'm going to be looking at replacing the furnishings every, depending what it is, but it's basically between two and five years, not linen, just furnishings. Linen is used a lot more often.

14:13 What is that going to cost me? And then I plug that in. Well, I've already got the numbers on the spreadsheet, but I put the numbers in and it spits out, can I make money?

14:25 And here's the thing. Sometimes it will make money in the high season, but not in the low season. Sometimes, It'll even out and I'll be okay. We'll get the upside on the back end.

14:41 But I cannot go into these properties with a, can it make money? Or, well, if I was at 90% occupancy. I mean, I have to be realistic. I have to look at the numbers and work out, does this make money?

14:56 Because at the end of the day, I still have to pay that landlord rent if there is nobody in there. It is different when it is your own property. And you are banking on some capital growth as well. But at the end of the day, this has to make money because this...

15:07 is a business. Yes, I'm kind of doing it as a hobby. It's not my main business, but I run this through a company. And so this has to make money.

15:22 And if the answer is no, then I do not care how beautiful the view is. I do not care if I would want to live there. I don't feel like if it's a good opportunity, then I have to take it. If the math doesn't work, I walk away.

15:33 And that is where so many retailers sabotage themselves. They fall. in love with a product. And I can say this because hand on heart, I have done this so many times.

15:41 And you think, oh my God, it is gorgeous. It is exactly what my customers want. And you think, oh my God, this is gorgeous. I love it.

15:59 My customers are going to love this too. Or the sales rep is hyping this thing up and telling you it is the next big thing and everybody else is ordering it. Or you see this thing selling well somewhere else and you assume that it would work for you. Oh my God, how many times did I make that mistake?

16:18 My one competitor would outsell me 50 to one on one product. I could not sell that product for love nor money. She was ordering hundreds of units. I couldn't sell them because it's not what my customers wanted.

16:27 And like I ordered them in. I ordered them in because she was selling so many. I would see her on social media and I was like, I got to order those in too. If her people want it, my people want it.

16:41 But I didn't run the numbers because the reality was a similar thing of that same product never sold for me. So I want you to be looking at what is your margin? What is your margin after all of the costs?

16:51 How many units do you realistically need to sell to break even? What is your sell-through rate on similar products? I did not check that. I made this mistake many, many times.

16:57 I did not check that. And then. If it doesn't sell, what happens?

17:03 Can I return it? Can I offload it to somebody else? Can I trade it with another retailer?

17:12 I used to do that myself. Or am I going to be stuck having to discount it? You can weight these things if you want to. You can give them a ranking.

17:27 But at the end of the day, inventory is a cash decision. It is not a shopping decision. It is not a marketing decision. It is a pure cash flow decision because you have a business and businesses are designed to make you money.

17:40 That is their purpose. Hands down, if your business doesn't make money, it's not a business, it's a hobby. Every dollar that you spend on stock is a dollar that you can't spend somewhere else. It's a dollar that is not in your pocket.

17:57 It is a dollar that is not marketing. It is a dollar that is not paying for your people to be working. And the longer that stock sits, you are locking up that cash in something that is doing you nothing for your business. I know that sounds very, very doom and gloom, doesn't it?

18:14 But the upside is we can make oodles of cash. So before you say yes to the next order, I want you to run the numbers. I don't want you to be jaded by the view. I don't want you to be jaded by somebody else telling you how fantastic it is.

18:28 I want you to run the numbers for you and be ruthless. And if it doesn't make sense on paper, it will not. make sense in your stockroom. My point number three is buy for your customers, not for you.

18:50 Like I said, I haven't been in the rental market for 22 years. I've owned my own home for this long and I'm going into these properties and it took me, I'm going to say the first two weeks of looking. I've been looking for quite some time and probably the first two weeks, I poo-pooed a lot of them. Like I turned my nose up at them and was just like, I don't want to live here.

19:03 And then it kind of hit me when I, you know, how stupid that was. Because when I'm looking at these properties, it's not about me. I have to think about what my guests value. And remember that spreadsheet I told you about?

19:15 That is when I had the moment, you know, it even took me a moment. I had to realize that. And it was going into all these properties and going, oh, that one's got air conditioning. Oh, that one, the view on my spreadsheet.

19:31 This is how nerdy it gets. It literally says view, glimpse. view partial, view, I think it says 50%, and then it says view amazing. So yes, it might have a view, but I've literally broken down how good is that view?

19:47 Because the bigger the view, the bigger the cash. So it took me a few goes to start to think about what do these people want? And I actually got on the conversation with a Airbnb manager and I said, in this area, what do people want?

20:02 And they confirmed exactly what I said. So when I'm going into these properties, I'm not looking at what I want. I'm looking at what my guests value. So personally, I would not choose to live in a high rise apartment with no backyard.

20:23 And I'm really not fussed if I don't have super plush towels and fancy pants coffee, right? But my guests, they want, when they come to this location, they want convenience. They want to be able to be within walking distance to restaurants and beaches and any attractions. They want air conditioning because it gets hot here in summer.

20:48 And gosh darn it, they want a damn view. If they can afford it, they want that view. And they also want the other stuff, the nice chocolates, the fancy coffee, the stuff they do not have at home. Even if that property is not somewhere I would want to live, if it ticks those boxes on the spreadsheet that what my target guest wants, and I want guests who are paying a lot of money, right?

20:59 Because remember, I don't have the capital growth here. This is a pure cashflow play. And so this is exactly like your business. You have the equity in the business if you build a business that you can sell.

21:11 But in the meantime, the long game, that's the long game. In the meantime, in the short run, what we have to be doing is making cash. And for me, that's what these rental properties do. So we are not buying for ourselves.

21:25 We are buying what our customers want. We are not buying the stuff that you like, what you would wear, what you would use, what fits your tastes. And if it doesn't sell, then you're stuck. We want...

21:41 your customer, and we want what they want. Your customer, look, I know that a lot of you will bring your customers in because of your style and your taste and your ability to choose. But the reality is you are not your customer. Your customer has a different budget.

22:09 They are not used to buying everything at wholesale, my friend, because we are tight asses, because we buy at wholesale. They live a different lifestyle. They have a different set of priorities and they have different problems that you are trying to solve for them. And if you are not deeply tuned into what they value, then you may well end up with products that you want, but that they don't, which means they don't sell, which means you are literally throwing your money away.

22:18 Let me ask you, do you know what your customer prioritizes when they buy from you? Is it price? Is it quality?

22:22 Is it convenient? Is it status? Is it... practicality?

22:34 Is it your extensive range? Or conversely, is it a very curated range? And most importantly, are you stocking based on the data and what actually sells?

23:00 Or are you stocking your inventory and your choices, the quantity and the quality based on what you personally love or even worse gut feel? Because here's the reality. Your job isn't to curate a store full of things that you would buy. Just like this is not about me buying, renting a property that I would want to live in.

23:26 Your job is to curate a store full of things that your customer will happily part money with to buy. And sometimes that means stocking products that you would never choose for yourself. And if you've been around on the podcast for a while, I'm going to just quickly recap the story of the hooded baby towels. So if you haven't been here for a long time, for a while, my stores sold eco baby products and I had a baby.

23:40 I remember getting a hooded towel, you know, the little, they're shaped like a triangle and they've got a little hood on the top. I remember getting one for my baby shower, using it once and thinking, this is the stupidest thing in the world. Who, what, like the hood is too big. It comes over the baby's face.

23:46 The sides never roll up. They're just never, they're just useless. Okay. I'm going to call it.

23:56 I think they're useless. But my team told me that we got asked for hooded towels all the time. I didn't believe them. I thought that they were just trying to, you know, pull a fast one.

24:11 And so I made them record it every time someone asked for a hooded towel. It didn't even take two weeks before I could see the numbers. And I was like, oh my gosh, I've got to bring in those hooded towels because it is not about me. Even though I think they're the stupidest thing in the world, the fact was the numbers didn't lie.

24:29 The thing was, every one of those people who asked for a hooded towel was $49 that was not in my till. So ordering the stuff that your customers want isn't selling out, even though it made me feel like it at the time. It is just being a smart business owner. Okay.

24:48 One last thing on the property front. When I list my Airbnb, photos are everything. If I can not sell the dream, if I cannot sell the product with those pictures, I do not get another chance. They are literally scrolling with dozens of choices to choose from.

25:10 Some are going to be cheaper, some are going to be more expensive. Guests do not walk through the door before they book. They scroll through the pictures. And if those pictures do not make them feel something, if they do not see themselves sitting on that balcony, relaxed, with a G&T in hand, looking at the view on holiday, living their best life, they're not booking.

25:21 I've lost that sale to somebody else. And so I invest in styling. I bring an expert in to do all the zhuzhing. I am not a knick-knacky kind of person.

25:29 There's no knick-knack, knick-knack, paddywhack. I get somebody else to come in and do that stuff. I can do the big stuff. I can't do the little stuff.

25:43 I get somebody to come in and look at my lighting. I get somebody to do professional photography. I literally have a guide of how I want my properties done. And I hand that to the photographer before I get them to shoot.

25:53 And if they cannot replicate these exact images and the exact sort of style that I want. I don't give them the job. And so I want specific angles. I want a specific filter.

26:10 Let's use it for what a better word. I want a specific preset on top of my pictures. So I pay for all of that because the experience starts with that first impression and I do not get another one. And in retail, your first impression is not just your shop front.

26:17 If you've got one, it is those product photos. It is your online store. It is your Instagram. It is your email campaign.

26:40 And if your pictures do not sell the product, you may never get another chance. But here's what I see all the time. People put stock on the shelf and then they just post a really bad photo and they put it up with their lighting because there's bad lighting, because the supplier has not given them the lifestyle shoots or the flat lay shoots. And then they wonder why nobody buys it.

26:55 And I literally last night when I was looking at different properties and waiting and I was going in to do my research. I could see two properties in the exact same building. And it was the building next to the one I just looked at. And one was $1,700 for two nights.

27:04 And the other one was $2,700 for two nights. That's a thousand dollars difference. They both had views. I was like, okay, maybe one doesn't have parking.

27:16 They both had parking. The reality was one had professional photos and the other one had really bad iPhone. I'm not even going to say iPhone, really bad photos. The lights weren't even switched on.

27:32 Like you would... You could see it was a nice place, but you couldn't guarantee it was a nice place. And that difference was $1,000 over two nights, $500 a night. Or even worse, what I see is I go to a website and there's no picture.

27:45 It says the image is coming soon. I mean, what's the point, my friend? No one's going to buy that. Your customer's journey starts before they walk through the door, before they even think about ordering.

28:07 It starts when they see your product online, when they get your emails, when they scroll your socials. And that first impression, if that doesn't connect them with what they want or what they need, or it doesn't spark some interest, they're not coming in. So treat your product and your store presentation the way I treat my Airbnb listings. Make them look irresistible.

28:22 Show them, show your customers how it fits into their life. Make them feel something because pictures sell and presentation sells. If you are not investing on that, trust me when I say you are leaving money on the table. So here's where this all comes together.

28:42 With my Airbnb, I'm diversifying my portfolio. I'm renting properties to minimize my upfront risk and to maximize cashflow, but nothing on the back end. But I'm not tying up hundreds of thousands, if not millions of dollars of cash in real estate. I'm creating an asset that generates income before I fully commit.

29:04 The other thing that I haven't mentioned is it gives me the ability to test demand in a particular area or even a particular building or particular style so that when I do want to invest my cash, I know I have proof that actually what people want is a north-facing place with a view. You know what? They don't really care about parking. Great.

29:22 I just saved myself a couple of hundred thousand dollars. So I'm proving before I commit huge amounts of money. So small risk. Good liquidity, but knowing that I have on the back end this data that will allow me to put hundreds of thousands or millions of dollars into a property.

29:34 And you can do a similar thing with your inventory. It's called pre-selling. You sell the product before you buy it. You take the orders, you collect the cash, and then you use that cash to fund your inventory purchases.

29:43 And suddenly, you're not guessing. You're not hoping. You're not tying up cash on stock that might sell. you know it's going to sell because you've already sold it.

30:02 And just like renting that property instead of buying, pre-selling reduces your risk. It improves your cash flow and it gives you flexibility, but it also proves demand, not just interest. And you can test new products without commitment. You can fund your inventory with customer's money instead of your own.

30:17 That's so much. This is one of the smartest ways to buy smarter and to grow sustainably. And if you've never run a pre-sales campaign before or you're not sure where to start, I've got something for you. It's my pre-sales campaign toolkit.

30:45 I've been working with pre-sales with my one-on-one clients and with our retailers inside of the 5X framework. And I put together this toolkit and now I'm sharing it with you. It is a step-by-step toolkit that walks you through how to come up with the right offer and then plan, launch and execute a pre-sales campaign in just a weekend so that you get paid before you place the stock order and you stop guessing what will sell. There is no fluff, my friends.

30:55 There is no overwhelm. It is just a clear, do this, do that, plug these numbers in. It is a process. That will help you generate cash flow before you place any orders.

31:14 Because pre-selling isn't just a tactic. It is a smarter way to manage risk and to buy inventory and to build a more profitable retail business. If you want to grab that pre-sales toolkit, you can do so over at selenaknight.com forward slash toolkit. Whether you are renting properties or buying stock, the principles are the same.

31:26 You have to know what kind of business model you have. You have to know whether we're doing this for cashflow or equity. We've got to run the numbers. We are buying for our customers, not for ourselves.

31:46 And we're going to invest in that presentation. And if you want to reduce the risk and improve your cashflow, pre-selling is one of the most popular and powerful tools that you have in your retail arsenal. If you are ready to stop guessing and start selling smarter, go and grab the Pre-Sales Campaign Toolkit. Let's get you moving.

31:56 You can grab it over at selenaknight.com. www.thelena.com/.toolkit. Thank you so much for listening and I'll see you on the next podcast. So that's a wrap.

32:33 I'd love to hear what insight you've gotten from this episode and how you're going to put it into action. If you're a social kind of person, follow me at The Selina Knight and make sure to leave a comment and let me know. And if this episode made you think a little bit differently or gave you some inspiration, or perhaps gave you the kick that you needed to take action, then please take a couple of minutes to leave me a review on your platform of choice. Because the more reviews the show gets, the more independent retail and e-commerce stores just like yours, that we can help to scale.

32:33 And when that happens, it's a win for you, a win for your community, and a win for your customers.