Analyzing Investment Properties for Airbnb

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Hey, what's up guys, it's James here and in today's video, I'm going to break down for you how I go about analyzing properties. When I'm looking to invest into a property for a short term rental, anytime I invest in a property for a short term rental, I want to make sure that my analysis is on point, I will know that I'm buying a property for the right amount for the right deal, that I'm getting a good property that's actually going to be able to yield a really strong ROI for me.

Now, I talked about in a previous video how I was able to, I showed you the numbers behind how I was able to get a 258% return on investment in the first year in one year, with our most recent investment in a property for short term rental, that's in cottage country near Toronto. Now, in a market that is as competitive as the one near Toronto is and a lot of real estate markets are right now finding a deal that yields those kind of numbers is absolutely unheard of.

Honestly, it's unheard of even in a non competitive industry in a non competitive market, I should say. So if you're looking to get a really great return on your investment, you need to have the right analysis tools, because the finding everything else to put a deal together that can be done quite easily find the money, find the mortgage, putting everything together. But the deal is the hardest thing to come by, it's pretty rare to find a deal, that's actually going to make sense.

And so you need to have the right tools in your toolkit, so that you can analyze a property and when in winning deal comes across your desk, you need to be able to identify it so you can take action quickly and start actually reaping the rewards from that. So again, in this video, I'm going to show you all the tools I use for that. Now if you are an investor who is looking to get started managing properties, or owning properties, investing in properties for Airbnb, if you're looking to actually start investing into Airbnb properties and short term rental properties, then I highly recommend you click the link in the description down below.

To schedule a quick 15 minute chat with me, I'm offering these chats completely free, where I'm going to talk to you about your goals and see if we can help you to achieve them. Again, for a really limited time, they're going to be completely free. So if you click the link, you might be too late. So I apologize if there aren't any times available on that link. But if you do click it and you see some times available, then book one right in there, you'll want to make sure you get in before we close things up. Because this is only going to be around for the next couple of weeks, where you can schedule a call with me.

And I'm gonna see if we can help you to get your goals over the next six months here, I'm going to be working with a really small tight knit group of students to help them actually get started investing in short term rentals and help you to buy your first or your next short term rental property.

So if that's something that you're interested in, you want to start investing in airbnbs, then just go ahead and click the link below to schedule that quick 15 minute chat with me, I highly, highly recommend you do that if you're interested in getting started investing in short term rentals. Now that further ado, let's jump over to the computer. So I can walk you through the numbers and how actually analyze properties. All right, so let's jump in here. I want to talk about how I analyze properties for short term rental for an investment in Airbnb, how do I figure out if it's worth investing in or not? Now there's a couple of different things you have to consider.

There's a whole bunch of different factors, I'm only really going to be able to touch on a couple of them in this video here and kind of walk through really just the starting point as far as having figuring out your income. That's one of the big things. You also want to factor in how you structure the deal, what the deal is worth how you can do renovations. There's a whole bunch of different ways that you can earn a really great ROI on an investment property besides just the income. So there's other factors to consider as well. You also have to have a grasp of the expenses.

Of course, in this video, I really just want to dial in on how do you actually project income reliably? Because that's a big question. A lot of people's minds when it comes to Airbnb and short term rental is they think that Airbnb is volatile that it's unpredictable. And no, it might fluctuate from month to month is not unpredictable, we can reasonably predict exactly how well a property is going to do and have a real high degree of certainty if we know how to do it properly. And the number one mistake that I see people making is they go to Airbnb, and they look at what other properties are priced at. And they try to draw some conclusions off of that.

Well, when you do that, you don't know if the price is actually what they're getting booked for. Right? Someone can price their property at $10 or $10,000. on Airbnb, that doesn't mean that's what they get booked for or that it's the optimal rate. You also need to make huge assumptions and religious guesses about the occupancy rate someone's going to get, you know, the different seasonal fluctuations, properties. And a lot of areas are going to fluctuate, they're going to be worth half as much or a third as much in the offseason as they are in the peak season.

So you need to be aware of all that. So you really want to use data on what properties are actually getting booked for what the rates are, what the occupancy rates are not what they're being listed for and not booked for. Right so we want to look at something like air DNA, I'm actually starting to work with a different data providing company as well. You're talking about more in a lot more detail later on here. It's called all the rooms but air DNA is my go to for right now. And so this is what I like to use where I like to start. So for example if I'm investing an area like a here in this Peterborough area.

Now for those of you who don't know, which is probably pretty much everyone Watching This Video. Peterborough is a small town. Well, it's not too small. It's about 78,000 people just outside of Toronto. So if you look Toronto's over here on the map, and then we've got the highway, we've got 401. Here, we've got 115 goes up to Peterborough. So this is about an hour and a half drive from Toronto, this distance here. And then all up in here is really great cottage country, lots of great lakes. You can see all the nice lakes here. And so people like to go and cottage up here.

And then there's also a lot of cottaging that goes on up, up more northern north of Toronto, kind of directly north of it, in what we call the Muskoka is. So this is called the lakes over here, you can see korth Lakes and then you've got the Muskoka is up in this area here. This is generally all great cottage country here. And so out here, we want to, we want to really understand a couple of things. Number one is that the income in a for a property in a in the actual city of Peterborough is going to be quite drastically different from the income of let's say, a lakefront cottage over in over in Cork links.

So if we look at the data for Peterborough as a whole, we're not going to get a really accurate picture of how well our property is going to perform. So you want to be able to isolate a specific area. Now, err DNA is really great for that, because you can use some of their tools to actually draw on the map, let me just see where I can, which one it is here.

You can look there, I forget which tool it is, but you can actually draw on the map and draw and specify a specific area specific geographical area that you want to really highlight can't pull it up right now. But there is a tool that allows you to do that. So that's kind of my starting point is I like to just draw an area. And that's just just for a really general starting point, I like to look at the area, and then I'll specify by based on the number of bedrooms. So if I'm looking at a six bedroom property, all I like to look at five bedroom. Plus, if I'm looking at a four bedroom property, I like to compare to four bedroom properties.

Now, that being said, if you find that there aren't as many properties in the area that are your size, and there's not enough for it to be statistically significant, meaning there's not, let's say at least 50 properties like yours in the area, then you're going to need to go a little bit further into collecting your data. But generally, I just like to start out by drawing an area around specifying the number of bedrooms, and then just looking what else is out there and what they tend to be getting in terms of annual revenue.

That's sort of my real baseline starting point for my research, I just like to get a general overall feel of it. Now when I want to dive in in more detail, I like to go in and look at occupancy rates and revenue. So occupancy rate is a good place to start. If you are dialed in at all, if you know what you're doing, you should be able to hit the 75th percentile data. So you want to look at again, specify entire home because you're going to want to have an entire home listing. And you specify the number of bedrooms. For me, I like to err on the side of conservative.

So I like to go if I'm looking at our most recent investment, which is a six bedroom property, I like to go to four bedrooms and up because again, I want to keep that I want to keep that number high active listings. So if I go to just six bedroom and up, then you'll notice I only have 26 listings. So I want to take something more statistically significant. And I would love to go on the lower end, because that's going to bring my projections lower and make them more conservative, which is what I want. I don't want to over project by a bad property and not have a cash flow for me or be a good investment. And then I want to go and look at how many, how many it accommodates.

Now the six plus is pretty deceiving. Because what if it's a 10 bedroom property, that's not a really good cop for me. So I want to look at properties that are going to be between, let's say, six to 10 minutes, I'm going to even set this a little bit lower, because again, I want to be on the more conservative side, our property can actually accommodate 12 people with the six bedrooms, we're going to limit it to 10, because there is only enough bathrooms to support that many people. So I want to keep it on the air on the side of caution go six to 10. And let's see if we apply it now we've got 76 active listings.

So that's a pretty good sample size there. So you can see that in certain months like the summertime months, you tend to get about 100% occupancy. If you're in the top 75th percentile performers on Airbnb, you're going to be 100% occupied. What does that mean? It means the top 25% of hosts, the top 25% of hosts are going to be completely entirely booked. And then the rest of them you're going to see like your 50th percentile, meaning that you're basically your top 50% are going to average about 90% occupancy in the top months of summer 77% in the in another month there and then as low as about 19% in the offseason compared to about 52% for the top 75% out because again, it's the offseason are expecting that.

So you want to basically run our projections and figure out what is the average occupancy rate. So the easiest way to do that is just to look at all these numbers and average them out over the course of a 12 month period, we'll figure out our average occupancy rate pretty safely that way we can look and we can also just see a whole bunch of different little things that you can look at when you're going further into it. Analyzing. For more on that again, just click the link in the description down below. I do know a lot more detail about this once I'm actually working with a student coaching them through it, I got kind of go through all the nitty gritty details.

And so if you want to get into if you're interested in that, you want to check that out, learn more about what it would look like to work with me personally and how we hold your hand through helping you invest in Airbnb and profitable Airbnb properties, then just click the link in the description down below, you can schedule a quick 15 minute chat with me, we'll go over your goals, figure out if I can help you or not. And I'll point you in the right direction. Now the next thing after occupancy, I like to look at is rates, the actual nightly rates that you're going to get for your property.

And I like to do it pretty much the exact same way. So I'm going to go for an entire homeless thing, I want to go for four to six bedrooms, and I want to go accommodates between six and 10 people.

Okay, and then I'm gonna apply those changes, I'm gonna do the same kind of thing here, where I'm looking at the, the, the average daily rate for properties in these different seasonal periods throughout the year. And I'm going to figure out what the average is for the entire year. And then I'm going to go and plug that into my spreadsheet. So that's basically what I'm going to be looking at, I'm going to plug it in there. And I'm going to figure out exactly how well the property is going to perform. And that's this spreadsheet over here. So I want to basically go and look at the average nightly rate and the occupancy rate that I get put them right in here.

I've discussed this spreadsheet in detail in another video. So we'll go over that in more detail another video, if you want, you can go back to my channel and check that out as well. This is where it basically calculates total ROI for the property you can see the combined ROI on this property that we just recently purchased in the first year is what 315%. So the numbers can be absolutely crazy if you buy the right property, and you know how to set it up effectively. So you plug those two in. And really once you take once you have your average daily rate and you have your occupancy rate, you can really easily figure out what your overall revenue is going to be on the property.

Now, I like to do a really conservative projection. So what I've gotten here, the numbers I just showed are figuring a 44% occupancy rate and a $350 average nightly rate, which yields a total gross revenue of $50,000. And so that's a very, very conservative projection. So I've looked at it crunched the numbers, I go, okay, what's my conservative, my most conservative worst case scenario? Everything does poorly, I'm operating in the bottom 50% of the market, really, things aren't going well? How does that look? And then let's run Okay, 75th percentile. If I'm up there, I'm performing well, I'm doing the right things to optimize my listing not doing insanely well, but just doing well.

What does that look like? And then that is obviously a much better number. But I want to make sure that even in the worst case scenario, I'm still hitting my investment goal and my criteria. So those are the main ones I like to look at. The other thing I like to do is there's there's different ways that you can go in and look at specific properties. And I like to pull specific comps and find the most directly similar listings to mine and see exactly how well they did in terms of revenue. So I can just fact check myself just make sure we really see the listings that are doing well see what makes them do well what amenities to add.

So that way I can go and say, Okay, I'm going to add a sauna, or I'm going to add a hot tub, it's going to be worth the investment, I'm going to get a good ROI, where I can see which properties make the most sense which ones make the most money, what are the most desirable features. So I don't end up getting a sort of a lemon of a property that isn't desirable on short term rental. But this is the basics of just how I look at analyzing properties for investment in short term rental, the first kind of steps that I take when I'm looking into it.

So again, if you want to learn more about how to invest in a property for short term rental, you want to learn more about all the tools I use the strategies I use, how to make sure that you buy a property that is going to yield an insane return on investment for you and your really strong investment both short and long term. Then again, just click the link in the description down below, you can schedule a quick 15 minute chat with me, I would love to go over your goals with you and see how we can help you achieve them.

Again, I'm going to be working with a really tight knit group of people over the next six months here, just 15 of us all working together, I'm going to be helping you and coaching you and holding your hand through how to get your first or your next profitable short term rental under your belt acquired, whether that's with your own money or leveraging other people's money. I'm going to show you how to do it show you all the different steps. So again, if that's what you're interested in, just click the link in the description down below. schedule that quick chat with me, I'd love to talk to you about that more if you got value from this video, which I hope you did.

If you've gotten some great tips, gotten some great pointers, then please click that like button, give this video a thumbs up it does help me out tremendously with you do the algorithm and also hit that subscribe button. I post two new videos every single week one on Tuesday and one on Thursday. So you'll want to make sure you're subscribed to the channel so you can keep up to date with all the new valuable content that we post on this channel every single week. Make sure you hit that subscribe button, hit the like button, schedule a call with me everything all that fun stuff and until next time. I will see you in the next