The difference between investing and spending

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Hey, what's up guys, it's James here. And in today's video, I'm going to be talking to you about one of the most common mistakes that I see even the most seasoned investors making, especially when it comes to investing in short term rental properties, and also deciding how to renovate their properties, how to furnish their properties, and what amenities to add to their properties. Now, before we dive into that, I do want to remind you guys that there is a link in the description down below to our free training on exactly how to invest successfully in short term rental properties. So if you want to learn our step by step process for this, check out the link in the description down below. And also get your hands on that free spreadsheet, we've got an analysis spreadsheet that we're gonna give to you completely free, so you can actually analyze deals and stay analytical and avoid some of the pitfalls we're going to be discussing in today's video. Now, that said, I want to talk about this big kind of mindset shift that I think is really, really important for investors to make if they want to get really great returns. And it's especially important with short term rentals. And the mistake that I'm seeing people make really, really often is clouding the line for themselves between spending and investing. And so ultimately, it is totally up to you what you want to prioritize when it comes to investing. And I want to preface by saying that there's nothing wrong with saying, hey, you know what this property that I might be buying as a short term rental is, is going to be partially used as a vacation home, it's not purely an investment. But it is really, really important to view it through that lens and to be realistic with yourself about what you're doing. Because what I see people doing a lot of is they'll buy a property as a investment, but really, they're seeing it as a vacation property, they're buying a second home, and they're justifying that in that purchase that consumptive purchase by saying that they're going to short term rental. And this can lead to a whole number of different issues. And on the flip side of this, I'm also seeing a lot of people go and try to justify investing in a short term rental, when the numbers don't really pencil out. And then just using it as a justification by saying, oh, you know, I could just go by and visit the property, I get free vacation. So even if I'm only if I'm only earning me 5% cash on cash, it's whatever, because I still get to use this property. I even saw a post in a group that I'm a part of, a couple of weeks ago, and the person had posted the stats on this property, and they had captioned it, what more could you possibly ask for other than having a property in Hawaii that you can vacation to for free and getting a 5% cash on cash return? Now what I could want, that's more than that is literally three times the cash on cash return at a minimum, I don't understand why you'd be investing in a short term rental property to try to get a 5% cash on cash return, when you can easily get a 5% cash on cash return investing in long term rental properties. Granted, you might not be able to do that in Hawaii. But why? Why would you care, you can easily take the extra 10% cash on cash return you're gonna get investing in a short term rental property that's actually decent, and just use that to pay for your vacations. There's no need to own a property in a market that doesn't do well. If you are buying for appreciation. Sure, that's one thing. But I frankly don't think that's a good strategy. When it comes to short term rentals, short term rentals. The whole big benefit of them is how incredibly well, they cashflow. And so if you're buying one that doesn't cashflow Well, you're in my opinion, taking unnecessary risk. Because ultimately that cash flow is what protects you if the market drops down anything were to happen if your income weren't to be what it is. Now, you want to have steady cash flow and you want to have substantial cash flow, it's going to weigh more than cover your cost of carrying the property. Now we all know that there's a much higher likelihood with a short term rental, that it's going to be vacant, a little bit more than expected or that rates might drop. And because they generate this incredible cash on cash return of 1520 30 40%. That doesn't really matter. Because then our worst case is it may we dropped down to 15% cash on cash, which is really not the end of the world. But if you're sitting at 5% in a good scenario, then your worst case is really that you're going to lose a lot of money every month if things do take a turn for the worst. And so that's why I really would caution people from trying to justify their analytical their investing decisions with these emotional arguments such as you know, I'm going on vacation there or going and spending this another one I see often as people will go and spend more on their renovation and they'll justify that emotionally by saying oh, well, it looks so much better. And I'm going to enjoy spending time there. Or they'll go and they'll spend way more than they should on an amenity like a hot tub or a sauna. And then they'll go and justify it by saying well, I bought the top of the line one because then I'm gonna go and use it. Well, I mean, you really have to distinguish you've got to draw a line somewhere. Okay. If you want to use it as both, that's fine. But you have to be honest with yourself is is the most important piece because what I see far too often is people going in and they're trying to justify their poor investing decisions later on down the road. They're lying to themselves early on and saying, I'm buying this as an investment. When they're justifying their poor decisions down the road by saying, well, I'll use it as a vacation home as well. So I think it is really important as an investor to go in eyes wide open, if you are going to be using a property for both a vacation property and a short term rental property that is fine. But make sure that you're you have realistic expectations of the income you're going to bring in and make sure that you don't go overboard and overspend on how much you're paying for the property, overspend on the furniture for the property, or overuse it to the point where now you're vacationing there so much, that you're not earning the income that allowed you financially to be okay with actually purchasing the property to begin with in the first place. So that is my take for the day. I hope you take it for what it's worth. And don't make that mistake. I see that happening far too much. And again, if you guys are interested in learning more about how to invest successfully in short term rental properties, get really great cashflow, really great cash on cash return. Make sure you're analyzing properties the right way, picking them buying them, setting them up managing them absolutely everything from start to finish, check out the free training that's linked in the description down below. We're also like I said, gonna give you our analysis spreadsheet completely free just for checking out that training. So you'll be able to analyze some deals and make sure that you know your numbers. So with all that said, please if you haven't yet if you're watching this video and you haven't yet subscribed to the channel, then make sure you hit that subscribe button it's right down below the video make sure you hit that subscribe button, give this video a thumbs up give it a like it helps me out tremendously with the YouTube algorithm. You have any questions, any comments, any thoughts, anything you want to share? Let me know in the comment section down below. And otherwise, have an awesome rest of your day and I'll see you in the next video.