Airbnb Investment Analysis – Ontario
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We’ve got an in-depth real estate investment property analysis walkthrough today. I take you step-by-step from the listing to the numbers to the results. And I share my thoughts and why I’m doing each step, so you can repeat this for yourself.
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Analysis on properties is one of the trickiest parts. But it’s very, very important.
If you get it wrong, you might think a property is no good. You’d pass on it when you should’ve made an offer.
If you get it wrong, you might think a property is amazing. You over estimated the worst-case scenario and you make an offer when you shouldn’t’ve.
In the video, the first thing we do is go over the agent listing. We look at the photos, too, and I share my thoughts on how I’d improve this property.
Improving, with short term rentals, are finding things that both increase the value of the home AND how to create a better experience for Airbnb guests.
Then we dig into the numbers. We go into finding property taxes and utility payments.
We outline the entire thing, including renovation estimates, loan numbers, and cleaning fees.
Last thing on the ROI sheet is the rental revenue and occupancy estimations. It’s different than estimating for long term rentals.
But I show you exactly how I get my own numbers and what I’m looking for. We find the worst case scenario.
I share the criteria so when I fill out an investment analysis spreadsheet, I know the results I’m after before making an offer (or not).
PS – Subscribe now! Two new videos every week!
Hey, what's up guys, it's James here and today's video, we're going to be going through an Airbnb investment analysis for Ontario, Canada. So what we're going to be doing is pulling up a property that is currently on the market in Ontario, Canada, I just research really, really quickly. So this isn't like a curated property that I've taken a long time to find. And we're going to basically run the numbers on this property using air DNA and using our investment analysis spreadsheet, run the numbers on it and see how it shakes out, see if it's a good investment or not whether or not I would personally go a step further contact the listing agent, contact the realtor kind of take next steps to place an offer on this property. So that's what we're gonna be doing in today's video. Now, if you want access to all the tools that I'm using in this video to run this analysis, like our analysis spreadsheet, training on how to do it, then just check out the link in the description down below, there's a link to a free training for how to invest successfully in short term rental properties. When you sign up for that training, we're going to give you access to the spreadsheet I'm using in this video completely free. So make sure you check all that out again, link is in description down below. If you liked this video, please do give it a thumbs up it really really appreciate it helps me out tremendously with the YouTube algorithm. So without further ado, let's jump over to the computer. And let's look at our property. Now. First thing I want to do is I'm actually just going to pull up my investing spreadsheet here. So I'm just going to go in here, grab my property analysis. And I'm going to go ahead and make a copy of our short term rental analysis spreadsheet so that I can mark it all up and edit it for this specific property, which is going to be 1362 Crystal Lake Road. So we pull this up, the first thing I want to do is just name this so that I can track it properly. Let's just see here, 1362 Crystal Lake. Okay, now let's jump in. And let's start by looking at the property. So here's a property that I found. It's listed, it's in kinmount, Ontario, which on the map here is basically right here in this area here. So for anyone that's familiar with the area we've got, but let me see here, Toronto, right down here. We've got Prince Edward County, Kingston, Ottawa is out this way. And so we're just basically right in here, just above the the core of the lakes kind of buckboard area and here. And so that's the area that we're that we're looking at is kind of right in this pocket here. And so this property is listed for $509,000. And it is a two plus one bedroom. So usually that means like a den or something, and two bathrooms. And so if we look through it, you can see the property is relatively outdated, but it's got a real like cottagey feel to it, I think you could actually do a lot with it. In spite of like the wood, wood paneling, stuff like that, that's actually pretty desirable in this area. When people are looking for cottages, I wouldn't say it's desirable in its current state, there's definitely some freshening up way better decor that needs to be done in here. But overall, the bones of the property are definitely pretty good, pretty solid. And so we look here, it's got the bathroom. That's cool. So the nice thing is it's got two bathrooms. So as long as you can have some additional accommodation, whether that's building in another bedroom, potentially putting a geodesic dome on the property, then you could accommodate up to 10 people with the bathrooms good. It's got two full bathrooms, you'd have to do some renovation of the bathrooms because as we saw here in the photos, they're pretty outdated, but they definitely have how's the bones there because obviously adding in a bathroom, things like that, that can get quite expensive. But the property overall, the bones of it are definitely really solid. It's got a detached garage. And the thing that I really liked when I was just initially browsing is that this property is super secluded, right? It's out in the woods, it's actually on 14 acres of land. So you get 14 acres of land, when you buy the property, it's got really close like two minute access to the to the lake nearby. So you're not paying the really high price of being right on a private lake. And you're also not paying the higher property taxes of being on a lake, but you do get direct access to the lake. That's one thing I always like not having neighbors nearby. Having an on land read on neighbors nearby is really great if you are going to be hosting larger groups like this property would be catered to. That's really helpful just because, you know, when you get 10 people together on Tuesday night, they're gonna be louder than your neighbors would likely want. And so having 14 acres around you is really nice. It's less than two and a half hours away from the GTA, which is the Greater Toronto Area. So that's really helpful so that you're nice and close to Toronto where a lot of people are gonna be traveling up from you've got you know, snowmobiling, ATV hiking trails, great boating, fishing and swimming on the lake. So that's going to really draw a lot of people up all season. I would say for this property I would want to add like a hot tub and probably a sauna as well to drive up more people in the wintertime. We'd want to do some renovation work to the property. I'm going to just initially ballpark the renovation at about $30,000 But I would want to dive way more into that once I get more into like a due diligence period for the property if the end initial numbers check out on it. So let's also just check and see how long the property has been listed. It's been on here for 30 days. So without having sat for 30 days a good chance I can get this for a bit lower than 599. I don't know what the the action has been like on this property in terms of offers they've been getting. But I would suspect if it's been on the market for 30 days or more, that I can probably get it for a little bit below asking price. But let's just say that we were to buy it at asking price, which is $599,000. And let's say that for closing costs, yeah, that's going to auto calculate home inspection. $500, which I'd want to do furniture interiors, I'll get to in a moment, but let's just say $30,000. For the for the Reno work, land transfer tax, if you're in Canada, you can go to just rate hub.ca. And you can just put in the 599 $1,000 purchase price, you can put in kinmount. Ontario, and then whether or not you're a first time homebuyer, and there you go, land transfer tax for this property is going to be is going to be $8,455. So let's put that in here. $8,455 for land transfer, interior design photography $1,200. Yep, that's going to be accurate. Okay, so now let's figure out this is just a placeholder for right now, we want to figure out furniture and interiors next. So I'm just gonna go to the furnishing tab here, we're going to put in that it's a three bedroom, two bathroom. So let's do two queen beds, one twin bed, living room, dining room, kitchen, two bathrooms, miscellaneous for this property, I'm going to also want to add one of the to the hot tub or the sauna. So that's going to bring me up to 18,600, that's going to automatically carry over to here, so 18,600, with the hot tub included. Now, let's say that we're going to put a 20% downpayment on the property and our interest rate, let's say that it's going to be about 5% lower in Canada than than it is in the US. So I know that's going to be different, depending on where you're located. Let's say you're out about about 5%. Which I think right now, that's pretty accurate for what you'd be you'd be looking at. I haven't looked at a number of months. So I know that things have increased, but let's use 5%, and then cleaning fee per rented week, knowing this area, I know that to clean this property is probably going to be right around $300. And we're probably going to be averaging about 1.5 stays per rented week. So if it's rented a full seven days, some of the times we're gonna get a seven day booking other times we're gonna get three bookings two bookings, so it's probably going to average out to about 1.5. So I'm going to do 1.5 times 300, which comes out to 450 that's accurate their advertising and tap costs, I'm gonna leave that as 504 because there's two software's we use a $35 a month one and a $7. month once that works out to $504 a year, yard and snow at $1,200 is pretty accurate. It's gonna be about $100 a month in the summer for yard maintenance $100 a month in the winter for snow removal. Electricity. Let's see if we can gather that from the listing here anywhere. So doesn't say I don't have any like any property taxes, I don't think or anything on the listing here, right off the bat. Let's see if they've input anything. The expenses, they put anything in here. No. Okay. Um, yeah, so we're going to just estimate these for right now. But again, this is something that I would want you if the numbers check out here, I'll go over what my next steps would be after after going through the numbers. But if they do it numbers, do check out that I want to just asked the listing agent to send over details on the last 12 months of electricity bill, things like that. I want to know if it's on a well, or on septic what like what it or if it's on municipal water, all that sort of good information to know. So, forest, your heating, that's good, it's gonna need an AC for cooling. It's on septic. It's got a dug well, okay, so based on that, I'm going to say that electricity is going to be about $3,000 a year. water sewer, we're not going to have an expense there, we're going to have some septic clearing out that kind of thing. But nothing major on the like an annual basis cable internet, I would assume is going to be about $80 a month for this area for high speed and then accounting at $1,000 a year property taxes. Yeah, it doesn't have the property taxes in here. So this is just really going to be sort of a guesstimate. I'm going to put about another $3,000 a year in property taxes. But again, I want to double check on that. And actually ask the listing agent, this is just a placeholder. So if I were doing this for myself and are actually considering investing in this property, I'd probably go ahead and highlight the cells where I'm just making estimates so that I make sure I double check those and don't forget to come back and adjust them. So I'd highlight this one here for electricity and this one for property taxes so far. The rest of them I know it'd be pretty accurate cleaning I want to check with my cleaning crew to make sure got them to give me a quote on it. And then insurance yeah is going to be $3,000, I know that from from insuring properties in the area is going to be right around there. And then the rest, that's pretty well, it's pretty well all I'm going to have here. So now I really want to work out the revenue side of things. So I've worked on the expense side of things. Now I want to figure out revenue. So let's look at a property similar to this. Now the other thing that I'm going to consider as sort of a way to build in a backup plan or contingency is going to be auxilary dwelling units. Because I've got 14 acres here, I can definitely put something in the backyard like a geodesic dome, that's actually something I did on a recent property that's going to be going live in just a couple of days here. By the time you're seeing this video, it's probably already going to be live. And so that's a really cool play here, you can see that like there's no neighbors nearby, I can easily put like a geodesic dome out here in the forest somewhere, it'd be super cool. We've got the extra bathroom space for it as well. So being able to do that, and just Yeah, so this is pretty cool. We've got this like a covered picnic area. So that's where we put a geodesic dome and right out here. And being that we have the space for it. And we've got the extra bathroom like we've got two bathrooms there. So I probably on this property just to avoid having to go through the whole permitting process and built like building something larger, I'd probably build something that's under the 10 square meter mark wouldn't help hook it up with any kind of plumbing, I might do that later and have like its own freestanding geodesic dome not to get permitted, do the whole go the whole nine yards. But with something like this, I'd probably put something like right right over here, just a geodesic dome with just a bed in it. So if people could hang out there, and yeah, that'd be a pretty cool space. And again, I know I can do that for like another $10,000 Or so I think it was about $14,000 from start to finish furnishing the platform. Absolutely everything on the recent project I did. And that should increase the income earning potential. But first things first, let's just look for comps based on the property as it is assuming $30,000 Were the Reno budget. So three bedroom property, I'm going to look at right in this area and see if I can find some that are that are that are similar comparable that have been available for the for the whole year. So the first thing I want to do is I am going to go and look at revenue. And just see because this area that the challenging part here is that this is a good thing for people to note is that like the challenging piece here is that this encompasses all a Peterborough, which is a larger city of about 100,000 people. And it encompasses a lot like all these areas are kind of large, like this one encompasses some really nice properties around the lakes and everything. So if we look at the averages for revenue in these areas, it's just not going to be really an accurate representation of what this property is actually going to bring in. So for that reason, I tend to try to shy away from that a bit. Whereas if I were to, if I get to cooperate with me here, let's go up to Mindanao. So this is an area that's a little bit north of where I'd actually buying the property, it's right in here. So it's a bit north, but it's probably a more accurate representation of what this property would actually do. Because it's a smaller area that doesn't encompass a large area, a large town as well. And I know that the properties up here are kind of similar, more similar, because they're not some big, really nice lakes. And like all these big nicer lakes, people tend to build mansions like really, really nice cottages. Whereas up here, you see less of that. So if I were looking for averages, I probably want to pull the averages from this area here. So the nice thing here is I want to look at specifically at upscale midscale. Upscale. This is let me just see here. Okay, so there's only eight active listings here. It looks like we want entire place. Both professionally managed and, and personally individually managed guests we want to do Yeah, from six to eight bathrooms. All let's do from let's do for this for eight, six to 10. So we can one the search a bit. Okay, so now there's 21 active listings. So that's pretty good, we can run the numbers on this, I'm just going to export it here as a CSV. And I'm going to look at what are the numbers on on these properties in the is the 75th percentile here you can see. So that's what I really want to know. And I just want to grab 75th percentile data for the year 2021. And I'm going to sum it up here. So let's just grab this January through December of 2021 saying is percentile 75th percentile. And then yeah, this is basically going to be going to give us Boom $109,000 Basically, so $109,000 is what we're looking at for the for this property as an average of these these 21 active listing. So it's a decent dataset to like give us some initial inclination of how the property will do but it's only 21 properties. So the thing to consider here if I need you guys are in looking in more rural areas like this where you get a small number of active listings, when you filter down your search results, you really kind of have to take that as just one single data point on your map of all your data points you're going to be looking at, because looking at this alone, if we have, let's say, three properties that are just absolute mansion, three bedrooms are really, really nice, they're going to skew the numbers upward. And so it's not really going to be a good accurate representation. So this is just one data point out $109,000. The other thing we want to look at is what the occupancy rate is going to be. So for, let's say, three bedroom properties that accommodate we said six to 10 people, there's going to be see. So percentile, let's see is going to be like I would work the numbers out averages out over the course of the whole year. But let's say that it's right around 90%, let's say 85. So I'm going to use 85%. I also want to just see if I can broaden this a bit more. And be and go. No, you can only it looks like you can only choose a range. Okay, there we go. So economy through upskill, if we apply that, okay, so now there's 36 active listings. So that's nice. And I'm just going to, I'm actually just going to export this and see what that gives once we include the economy as well.
And just do the 2021 numbers here. Again, that's that's a new feature that air DNA just launched, I'm just getting used to how to use that properly. But that's it's quite cool that now they've got the export feature built in as well. But if we go to December 2021, from January, so that's, that's looking at more like 90 $98,000. So let's use that as a number. Because realistically, this property is going to be more like less towards the really upskill side of things. $98,000. So let's put in $98,000 here, and we said about 85% occupancy rate. Again, if you've seen any of my other videos, I really highlight that when you input your occupancy rate, that's going to impact your overall cleaning fees. Because obviously, the more occupied your property is, the more cleanings are going to have, the more turnovers are going to happen, the more cleaning you're going to incur. So you really want to be mindful of that and make sure that your event if anything, overestimating what your occupancy is going to be that that's going to get you to your revenue goal. So I'm gonna put that in 85%, just so you can see here, if I drop that down to 50%, and we look at this cell over here, h 12. It looks like the NYSP fee, right now it's just shy of 20,000. If I drop the occupancy rate, then that drops down to $11,000. Right. So we want to be estimating more on the high side, if anything, so 85, that's going to have us be a little more conservative in our projections. So you can see that based on that we're beginning a cash on cash return on this property 17, just over 17%, that's really good, that's really solid, anything over 15% I'm happy with, especially when we factor in that I could potentially bring in more by adding a geodesic dome, there's no neighbors like this is a good solid property that I'm interested in at this point. So the next thing I would do, I'm not going to save these, let's just get these out of here. The next thing I want to do is now just go in and look more for specific comparable properties. So I'm going to just do a kind of a shortened version of this. But the way that I like to do this, all my properties is I'll go in here and I'll look to see what I can find that's similar to this property in this area. So I would just kind of shorten this up three bedrooms, I would say, Okay, here's your property that did that did $198,000 It's a three bedroom, three and a half bathrooms are really good comp for that property, right? Obviously not right, if we look at this property, again, take in this property, and then look at this stunning log house on a private lake. So this is what I'm talking about where the numbers can get skewed when you're looking at the at the averages for the market as a whole. Because this property on paper, it's a three bedroom property that accommodates eight people. So it's it's like just on those stats alone, it is a comparable property. But as soon as you take a look at it, you realize, okay, this is not a good comp. So the 200k from this is definitely pulling those numbers up. So what I really want to do is find properties that are actual, reasonable comparables to the property that I'm looking at. And that have ideally been available for as close to 365 days out of the year as possible. So you can see this one was available three for 352 days of the year. So that's really good to see. What we want to do is find other properties that are actually good comparables and have been around for that long, you know, available for that many days of the year or similar. So here's one, it's a three bedroom, one bathroom accommodate six people brought in 36k, but it was only available for 277 days out of the year. So there's basically 160 days a year there and we don't know which 160 days of the year that it wasn't available. So if that was high season that it was unavailable then maybe this property could do that. 90,000 100,000, just like we're projecting, if it was low season that it wasn't available, then maybe you can only do 50 or 60. Right. So it's just tough to know, unfortunately, air DNA doesn't give us the stats right now on, on which days it was available, not something you actually can get from all the rooms. So it's worth checking that out, if you're in a more rural area as well. Here's another one, that just wouldn't be a good call. Because it's again, it's only available for 129 days of the year, it's not qualitatively anywhere near the same as our property. So I would really scour around and try to find good properties that are actually comparable to the one I'm looking at. And then brought in and then we're available for as many days of the year as possible. So for this instance, I would look at something like, again, here's another one, this one was available 351 days of the year.
Now it is has a deck. Let's see. Yeah, so not a really good comparable, but the listing is pretty poor, like they didn't do a great job of the listing. After renovation, it might be a pretty good comp, honestly. So I think out of the ones that we've looked at, this is the best comp so far, the property that we're looking at actually does have a walkout, a walkout basement as well. So it honestly would probably be a pretty decent comparable to this one. Other than the fact that this property looks like it's on the lake, but they did a really bad job with the listing. So this is a good proof to show that this that this $80,000 number would be pretty achievable. They're also only listed on VRBO. So not on Airbnb that's missing on a lot of opportunity there. So again, I would just go through this process, I would look at this area, I would look at the area over I look at Mindon try to find these cops. And what I'm looking to find is can I actually prove or disprove this number? If I find other properties that are just as nice as this property? They're listed really well. They're on Airbnb and VRBO. And they're bringing in $50,000. And that's what I keep seeing, then it's a good indication that this $98,000 Number is pretty pie in the sky, it's just not going to happen. So the numbers have to work at $50,000. Right? Whereas if I find that all those properties that I'm looking at, they're really similar. They're listed nicely all that kind of thing, their their bring in $98,000 $100,000, like, okay, great, that's a really good positive sign that I'm going in the right direction here. If I find properties that are similar properties, but they're not nearly as well done, like in their Airbnb listings, it's bad photos, everything else and then bring in $90,000. Again, that looks good to me. If I find properties that are that are doing that, and they're bringing in $100,000, that looks even better to me. So that's what I'm trying to figure out is what can I actually bring in based on looking at the real comps in the area. So that's the one the next step there. Now the next step after that, assuming this all looks good, I would at that point, just look to to figure out my downside on the deal. So based on how that analysis went, I would try looking at doing the same kind of export for revenue, and try to figure out what the 50th percentile numbers are going to be. So if I, if I just pull the export up again, I can look and see here, okay, what the 50th percentile numbers look like, I can go back in history and look at 2018 2019 2020. And really what I'm trying to figure out is, is there a worst case scenario with this property where it would bring in less than what it costs me to carry it every single year. So basically, the breakeven on this property is going to be I think, right around $60,000. Yeah, so about $65,000 is where I'm going to find that all breakeven. So as long as I can't envision a worst case scenario by looking at the data and not just thinking about it, right, looking at the data, if I can't conceive of a worst case scenario, dropping less than $65,000. That's another really good sign, because that's what I don't want to do is make sure the upside is there. But more than that, I want to make sure that the downside is protected. Now, in this case, I would also be factoring in for the worst case scenario, if I had built a geodesic dome, because that's going to improve my numbers substantially, that's going to give me a really nice backup plan, where I can probably boost my annual revenue by 20 to $30,000 a year just by spending $14,000 on adding a geodesic dome. So I'm going to use that factor that in my worst case scenario. And again, the benchmark that I'm trying to hit for a moderate scenario is 15%, or greater cash on cash return. So if I can't conceive a moderate scenario, that's going to bring me in at least 15% cash on cash, I'm not interested. The next thing I'm looking to do is look at my downside scenario. And in a worst case scenario, I don't want to be able to put myself in a position where I'm going to be at worse than breakeven. In other words, I don't want to be losing money month over month or year over year. So I never want to put myself in a position where the property isn't going to be able to cover its own carrying costs for the year. As long as those two things check out then I'm ready to go ahead and reach out to the realtor, get in touch with them. Let's talk to the listing agent. Let's get more details so that we can firm up all of these other expense numbers in the in the property. Also get an idea of how much we're going to be actually offering So we can adjust this purchase price. Because the other thing is if I can get this property for, let's say $560,000, then obviously my numbers improve, right, I can afford to have a lower worst case scenario, I can actually drop down to about $63,000. Now, so it gives me a little bit extra wiggle room. And my moderate scenario of $98,000, that actually looks a lot better, right? It's 19% cash on cash instead of the 17% that we were looking at before. So once I've checked out that, hey, all these numbers kind of work, that's when I'm going to dig in more, get them talk to the listing agent, figure out what all the other expense numbers are, firm that up, figure out what offer I'm going to go in with, and then place an offer. In this case, the offer would likely just be a conditional offer, given the property has been on the market for 30 days, I'm not going to be worried about trying to get into a bidding war with people trying to go in firm, I'm just going to go with conditional offer that's going to be conditional inspection. Give me some time to get an inspector in there, negotiate things down a bit more after the inspection because it showed X y&z that needs to be repaired. So I'm going to draw down the purchase price in accordance with that, and then basically go from there. So that's this property. Again, this is just a property that I just looked at just real quickly, I wasn't looking for long time. And this is a deal that to me, the numbers penciled out so far. Again, I would take it a little bit further than this before actually going and placing an offer. But I just want to say like, Hey, there's a lot of people out there that are worried that deals aren't out there. And this is a really great indication that there are great deals out there to be had, you just didn't know what to look for, and how to break them down how to analyze them,
this property might still literally this property might still be on the market when you're watching this video. And so again, this is not my endorsement to say, hey, you should buy this place. But it is my endorsement to say, hey, after what I've seen so far, it looks promising. And I would consider placing an offer on this property myself, if I were in the market to buy another one right now, you know, you want to do your own due diligence, you want to have these tools to be able to do that. So just check out the link in the description down below. So that will show you how to do this due diligence properly, how to make sure you don't miss anything, you don't make any mistakes. And we're actually gonna give you a copy of this exact tool. So this spreadsheet that you see me work through this whole time here, we're gonna give you a copy of that completely free as soon as you sign up for the training that's linked in description down below. Again, it's the one that's linked there that says free training on how to invest successfully in short term rental properties. Click the link register for the training, we're going to email you a copy of this spreadsheet, you're going to get the full training completely free. And again, that's going to allow you to really have likes astound to go out and buy really great deals in any market and be able to find deals like this that make a lot of sense. So again, check out the link in description down below. Hit the like button if you liked this video If you got value from it. Let me know your thoughts in the comment section down below. Any thoughts? Any questions if you want to see more content like this and let me know as well. Also, make sure you hit the subscribe button. I post two new videos every single week on this channel, so make sure you hit the subscribe button to stay up to date with those videos as we release them. With all that said, thanks so much for watching. I'll see you in the next video.