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I’m biased, but there’s no denying this calculator has made me (and saved me) a LOT of money. It’s made and saved our students a LOT of money. Today’s video walks through what makes it so great and how you can get a free copy.
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AIRBNB FOR DUMMIES:
Man, do I love this calculator.
I use it for every single investment I analyze. And our students use it for all their investments as well.
When you watch the video, you’ll learn how you can play with the numbers to make things work.
It’s not just the price that matters, but the terms. Lots of people forget that.
With this calculator, I can adjust the terms to see how I can make it work. Maybe it lets me offer a higher price and get the property.
You can answer all kinds of questions with this calculator:
– Do I do the 30k reno now?
– How much cash can I likely pull out in 5 years? 8 years? 15 years?
– What loan rate works best? Does it still cash flow in a worst case scenario, even if I couldn’t get a great rate?
– My property manager is charging 20% of revenue, what’s that look like for me?
And a whole lot more.
I also share my own targets when I run my numbers. In other words, what exact two results are my favorite to look at? And of those two, what do I want to see for a good investment?
Watch the video now to get started.
What's up guys, it's James here. And in today's video, I'm going to be going over my very favorite short term rental analysis calculator. Now I know I sound probably pretty nerdy saying that sends you in. But this honestly is a fantastic analysis spreadsheet that I love using for analyzing all of our properties that we invest in for short term rental, I literally use this exact spreadsheet to analyze every single one of the deals that we do. And so I want to walk through it with you and show you why it's such an incredible spreadsheet, why it's so helpful, why it's better than other options out there. And for anyone that wants to grab this, you actually can grab this completely free, there's a link in the description down below to our free training that walks through step by step by step exactly how to invest successfully in short term rental properties. And when you sign up for that training, we will send this to you a copy of it so that you can use it as much as you'd like completely free. So that's my gift to you, I hope you enjoy that. Let's go ahead and jump into the computer. And let's take a look. Now, this one's actually populated with some numbers. This is actually from a property that I've taken the address out of. But it is a property that I was analyzing just a couple of days ago. And so the purchase price I'm assuming on this property is going to be 500,000 is listed for a little bit less than that. But I figure it's gonna go for about $500,000. And so one of the things I love about this is that it does a really good job and allows you to input all of the different, different costs, different expenses, everything in a really effective way, I'm going to break down exactly what I mean by that. But it allows you to just put in all the information, it's going to auto calculate a few things that ought to be just auto calculated. And then you can also look at your projected returns in a few different ways. I'm going to break all that down here. So the purchase price it we put it in at 500,000. And then it auto calculates our closing costs at 1% of that which is $5,000. Home Inspection is a manual input. So you can see any of these cells in blue, are all going to be manual input. And then anything else in white is going to be a an automatic input. So this one actually should be white, and then all the others. So yeah, so basically, we've got our manual inputs here. So $500, home inspection, pretty straightforward, $15,000 worth of interior, this place actually included a bunch of furniture. And so the main stuff is we're going to be adding a hot tub and a sauna. If we purchased this property, and then about $5,000 worth of additional furniture and decor rehab work, it's pretty turnkey, it's not really going to need anything, there's not going to be any other acquisition costs, there's not like, it's not like we're borrowing money for any of this that we would then put the interest on. But it's really nice to have that space. So that let's say that you are borrowing money. And you're going to have a cost of borrowing that money for the interior design or for the for the furniture for the rehab work, you can factor that in here, land transfer tax, I just calculate that the link here at 2475. And then interior design and photography at 1200. So it's $600, a piece for interior design, and then for photography. So that takes our total capital investment for the property and everything to $524,000 and change. And then what's really cool down here, what I love about this is that ultimately, I think a lot of a lot of other tools and spreadsheets that I've seen, you have to input your average nightly rate and your occupancy rate, and then it'll tell you what your projected annual revenue is. And that's a bit contradictory to the way that I really like to and see the most value in analyzing properties is by starting with revenue, because ultimately, average nightly rate is a bit of a misnomer. It's going to fluctuate all throughout the year. So it's going to apply differently, it's really hard to come up with an actual average nightly rate that is going to accurately represent the entire year, there's weekends, there's weeknights, there's up season, there's down season. So figuring out what your average nightly rate is actually going to average out to is a little bit convoluted. It's a bit of a complicated process to get there, it's not really a very useful number to know. And if you miscalculate that it can really amplify the miscalculation in your revenue. So I always like to do is look at data to figure out what kind of revenue I'll be able to do and then work backwards from there. So I'll go and I'll look at other similar properties to this one I'll look at, I'll start with the high level data. So go like if this is a four bedroom property in the area, I'll look at four bedroom, two bathroom properties that can accommodate eight people. And I'll just average them out and look at okay, what is the market average for 75th percentile. And then I'll go and look for specific properties that either prove or disprove that hypothesis. So by the time I have my projected revenue, I know it's accurate. I know it's very accurate to what actually is going to be the real revenue from the property. And then I'll work backwards from there and go and do the same kind of thing with occupancy rate. Because occupancy rate is actually important. It is going to determine what your cleaning fees are going to equate to because obviously if you have more occupancy, it's generally going to mean more turnovers and therefore more cleaning fees, more cleaning expenses, and so you want to calculate that in but the average nightly rate doesn't really matter that much nor does the weekly rent or the potential end Your rent, we really just want to know, like, what is the revenue gonna end up being and with this, we can easily run a best case scenario, a worst case scenario and a more average scenario, and then what's our occupancy rate going to be, and I always like to be conservative on here and estimate on the higher side of occupancy. So if anything, I'm slightly overestimating my expenses on the property, that's what we're gonna do for the income side of things. And then you get to put in your loan assumptions, which is really cool. There's an amortization table attached to this, that breaks down the the total mortgage value. So with 20%, down, you'll see the automatically calculates that the principal amount on the mortgage is going to be $400,000, which is the $500,000 purchase price, minus the $100,000 downpayment. And then it basically just auto calculates as well, exactly how much of your your mortgage payment is going to be going towards principal versus interest. So we can figure out what our mortgage principal pay down ROI is going to be in, in year one. So you can see here that in year one, we're actually going to be paying down 11 and a half $1,000, were the principal on the mortgage, not factoring in the interest, that's also going to be paid. And that's just a valuable number. No, so you can see what is your actual like equity ROI, because a portion of the money that is going towards your mortgage is just a sunk cost is a true cost that is going to your interest. But there's a portion, that's actually decreasing the amount that you owe on the property going towards your principal, that's creating a more positive equity position in the property. So that's actually money that you're basically just putting into a piggy bank. And so we'd like to be able to see that we're not going to bank on that, because obviously, there's certain things like the property value decreasing, that could impact the amount of return you're getting there. But it is really nice feel to know that and so that's just a handy function of this spreadsheet is that you get to see all of that there's really no stone left unturned, and you can input, you know, if you're going to be doing a 10% down, do you quickly analyze, okay, you know, my, my cash on cash return actually jumps up to 40%. If I can get this for 10% down, maybe I want to look at options for doing that, whatever it might be, if I can get a better interest rate, okay, well, like it's at 2.6%, we're in Canada, we had the luxury a bit lower interest rates, I know a lot of you guys do in the US. But let's say that we have a 4% interest rate, okay, well, in that case, my returns actually going to be 23%. So you can really easily run the different numbers on different scenarios, your amortization, 2025 years, and then you can also see like, what is the actual mortgage payment going to be, and then therefore, what is the annual debt service on the mortgage gonna be, so you can really easily work those out. And then you also get projected cash assumption. So this is how much cash it's going to cost to close it at 20% down, plus your closing costs. And then here's your total cash to launch, which is downpayment plus furniture plus rehab, other interior design, photography, and then also total cash to launch, which is basically all the above plus a, a capital expense Reserve of 2% of the revenue of the property. So you can see it that gets calculated over here, it's actually at 3%, the way that we have it set up right now just to be a little bit more conservative with the maintenance expense. And so that's basically all your loan assumptions, and then your cash. And then you can really quickly just look at a deal and say, Okay, do I have enough cash on hand to actually launch this property, because I find a lot of people, if they don't have a tool like this, that really clearly lays it out. They'll underestimate how much cash it's actually going to take for them to launch the property. And they have to go and figure out different options and kind of work on the fly to solve those problems. Whereas this way, you can just really quickly and easily see okay, exactly what you need, right, you just know exactly what you need to set aside. So then we get into our variable expenses. So these are going to be basically your operating expenses, if there are going to be any rental management commissions. So for example, if you're hiring a property management company, you can build them in here, credit card processing fees, like a lot of this stuff, frankly, is more advanced, we wanted to have the have the flexibility to be able to analyze this way if we want to. But a lot of the time, I'll just keep all this blank and just assume a scenario where I'm just managing it myself on Airbnb. And so it just kind of removes the need for me to put in like booking site service fees and all that stuff, because that stuff isn't factored into my revenue. So I don't need to deduct it on the expense side of things. Because I know I'm not gonna be paying that, that different stuff. Taxes, you may be paying, depending on the area that you're investing in, you may paying like a lodging tax on like that. And then also management rental commission, a lot of people are gonna be paying that if they are hiring a management company. So important to be able to add that stuff in cleaning fee per rented week is basically just figuring out okay, what is the cost of one cleaning one turnover? And then how many turnovers do I expect to have in a week that's fully rented? So if my average length of stay is like five nights, then generally I'm going to have about one point. What does that work out to about 1.5 cleans per rented week. And so if my cleaning fee is 350, I'm going to multiply that by 1.5 and get myself up to 525. And then it basically just takes this in combination with your occupancy rate and it projects exactly what your cleaning fees are going to be on an annual basis. So you can see here if I adjust this to 70% occupancy rate, I can see how that impacts my cleaning fee, it gets them down to $1,900. So if I keep the same annual annual revenue with a lower occupancy rate, that's going to benefit me to the tune of about $2,000 ish, right. And so let's say if we do 80%, you can see it's now up to 21, point to $1,000. And then you can add in some additional expenses down here, if there are any others that come up. And then we've also left room for any additional expenses, just because on a case by case basis, you may want to add in additional expenses, depending on the property depending on the deal. And then you're just gonna have any additional like annual licenses or permits, advertising and tech costs. This is our our tech costs for operating the property. Like I said, we manage the properties ourselves. And there's a bit of technology, we use the cost about $500 per year to use that yard in snow. So that's just going to be your yard maintenance, your snow removal, pool maintenance, if there's a pool electricity, water, sewer, cable, internet accounting, property taxes, home insurance, short term rental insurance, in addition to this standard home insurance, CDD fee, or any liability insurance, other HOA dues, annual membership fees, VRBO, maintenance, reserve other fixed expenses, annualized. So you can see that really everything is included. Because, again, you don't want to make mistakes and under estimate what the expenses are going to be, because that is going to dramatically impact your overall return on investment. So you wanna make sure that's all calculated in there. And then that basically gives you your numbers for okay, what are your total fixed and variable expenses? What are the variable? What are the fixed? And then we can actually look at what is the what is our ROI? And so the big number that I always love to see are these two numbers right here, right? The annual cash flow from the deal, and the annual cash on cash return. So you can see what this property, it's pretty good. It's not fantastic, but it is good with these numbers. 26%. You know, we're generally aiming for anything over 20 25%. So 26% is good. I'd like to see, personally, I like to see closer to like 30 35%, if I can, but I know that this is a more kind of moderate case scenario that I ran projections with, I think in reality, I can probably do closer to like 110,200 20,000. And so if we look at that, then we're up to a 40% cash on cash return if we're able to bring in the extra 20k that I think we could. So this 90,000 is a pretty moderate scenario for this property. And then I also like to see, okay, what's the worst case scenario with a given property. And I always like to make sure that my cash on cash is going to be at least breaking even if not earning a bit of cash, even in the worst case scenario, because like I've talked about in other videos, I never want to be risking losing money and not, you know, having positive cash on the property. Because that could result in me having, you know, being forced to sell the property, which could be a whole big disaster. So you can see that, like, even if we were to drop this down to let's say, you know, let's say that we had a really terrible year, and we did $60,000, then we'd still be at a positive cash flow of 3700. Now, is that you know, is it 3% cash on cash return what I'm aiming for? Absolutely not. But if I go and look at properties in the area, which I've done for this property, and looked at and seen, okay, in a worst case scenario, even if it performed terribly, the worst I could possibly do is 60,000, then I know, okay, great, my costs, my expenses are going to be covered at the very least. So I can feel confident in that. We also just look at a few different metrics here, you can see what your annual occupancy is to break even which again, to be totally honest with you, I don't use these a whole lot, just because these things depend on the average nightly rate. And so it's not super important, valuable information. And oh, but it is in their net operating income, excluding the debt service, it tells you, or including the debt service, it tells you here. So that gives you your cap rate, the like kind of standard, short term rental approach. And then if you do a traditional approach and look at cap rate, this tells you what your real cap rate is on a more traditional approach, which is where you're excluding the debt service. So just two different ways of looking at your return. Again, depending on what type of analysis you're used to one of these metrics might give you a good kind of relative numbers so that you can compare it to other deals, even looking at the Maven looking at different ways. And then you can also look at your mortgage principal paid on like I mentioned, your equity ROI. One of the cool things as well is that we can say okay, if I wanted to do, let's say, like $30,000 in renovation work, and then I projected based on looking at ARV comps after repair value comps. So I looked at comps in the area that were similar to what I envisioned this property looking like after $30,000 With the renovation work that I've all budgeted out and figured out, knowing Okay, I think this property is going to be worth let's say, $590,000 after the renovation, so then I can put that number in here, and then just see, okay, great. My return on the renovation is 38.92%. And so that's actually really great. I'm getting additional return in the first year from that renovation. And then also just standard appreciation at 2% per year, what does that return look like? Because, obviously, we've talked about, there's a few different ways to earn a return when your real estate investing, it's not just the cash flow, cash flow, for reasons I've talked about are really, really important. And that's the number one thing that I look at. And you can see the cash on cash is going to take a bit of a hit when you do that renovation, but it's worth seeing, okay, well, Assuming all goes to plan, I'll make an additional 38% Return on my on my cash that I've invested in that first year. And on doing that renovation, so it likely makes sense, my return would likely also grew up my projected revenue, if I were to do $30,000, or the rental work, so I'd probably be actually increasing the overall return and cash flow too. So just really, really useful. And then again, we can look years ahead and look at the value of that property, you know, mortgage value remaining potential equity minus 20%. So we can see how much we potentially be able to pull out of the property and cash out refi. So it just gives you every different metric that you could possibly want to look at, to be able to analyze a deal and make sure that you're getting the best deal and that you're making the right decisions. So you can analyze, do I do that $30,000 renovation? Or do I wait and hold off? And not do that? You know, do I sink the $15,000? into getting a hot tub and a sauna? And doing decor? Or do I not do that? Do I try to get this this property for 10%? Down? Or am I okay with 20? Is a 4% interest rate gonna work on this property? Or do I have to get something sub three and a half percent, you can just run all these different analyses very, very quickly and easily. Because what I've found as well is that a lot of people because a lot of people, you know, when they were there's a common phrase that exists in the whole kind of negotiations patient phase and deal finding space is that the price matters, but so does the terms. And most people are just singularly focused on the price. And they fail to negotiate on the terms and they fail to consider the terms. But both things are really important. And so what I'm able to do with this spreadsheet is then go and find a deal where the numbers make sense, and the price is good. But then I can go and say, Okay, let's see what terms would make this deal even better. And then I can go and actually try to find terms that are going to make it even more advantageous for me. And that ultimately gives me a leg up over the competition where now I can actually pay a slightly higher price, because I know that I've got better terms on the deal. And I can then go and use those terms to get a better deal. So all kinds of really cool advantages from just knowing your numbers better to being able to analyze and make the right decisions to being able to buy properties that other people can't, because you can see the opportunities that other people can't do, being able to, you know, actually project in the future five years down the road, being able to figure out where to put your money and ultimately just how to make the best investments. This tool is really, really game changing for me, I hope it is for you as well, I hope you grab it. Again, the link is in description down below. Let me know your thoughts. So just make sure that you grab this, if you want access to this, we are literally giving it to you completely free and we're not gonna be doing that forever. So just make sure that you check out the link in the description down below. Register for that free training, check out the free training as well. And then after you've watched that training, we're going to send you a link to actually use this spreadsheet for yourself and grab it. Again, completely free. So all that said, I know this is a bit of a longer video, but I really really love this tool. I hope you do too. If you did, make sure you hit the like button, it really helps me out with getting these videos in front of more people seeing what kind of content you guys like and also just you know helping me out with YouTube's algorithm. So please take a quick moment here, hit the like button. When you're done with that you might as well just go over a little bit and hit the subscribe button because i post two new videos every single week sharing all kinds of tools, tips and strategies with you guys around everything to do with Airbnb whether it's managing properties on Airbnb investing properties for Airbnb, you name it, we cover it two videos every single week, so make sure you're subscribed to the channel as well. Give me a second, hit the subscribe button so that you can stay up to date. If you have any questions, thoughts, comments, anyone? Share with me anything you want to ask you about? Let me know in the comment section down below. All that said I hope you have a fantastic rest of your day. I hope you enjoyed this video and I will see you in the next one.Expand