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My Top Criteria For Investing In Airbnbs

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SUMMARY:

People ask me all the time how I decide what properties to buy. In this video, I share my buying criteria and the system I use to know which short term rental properties to invest in.

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For investors who are stuck in analysis paralysis, this video is for you.

I share every single step of my decision filters with you. 

Now, I do want to say that these are MY criteria for MY goals. YOU should come up with YOUR criteria for YOUR goals.

Every investor is different, so this is just what I do.

First, I share my two top-level criteria. 

These are the two major filters I use to quickly know if any property is worth pursuing.

For investors, it’s not about doing a deep analysis on every single property that’s for sale.

That would waste a lot of time. Instead, develop a system that lets you quickly filter properties.

Then, I share the renovation requirements and final bedroom and bathroom counts it must have.

(I also go specifically into why I do it this way. Spoilers: way, way better ROI.)

Next are my ideal criteria. This is a massive tip as well, because it can both make and save you money.

Finally, for the properties that make it this far, I share my deep-dive analysis requirements. I talk about how much a property needs to make and where I stand on worst and best case scenarios.

VIDEO TRANSCRIPT:

What's up guys, it's James here and in today's video, I'm going to talk to you about my top criteria when I'm investing in short term rental properties. Now before we dive into this, I do want to share with you some really, really exciting news is that in the description down below, you've got a link down there to a brand spanking new free training that's going to talk to you about exactly how you can successfully invest in vacation homes and short term rental properties and get an incredible return on your investment. Now one of the greatest things about investing in short term rentals is I mean, and there's just so many great things. One of them is that you can use that property as a vacation home and you can have all kinds of really cool second homes. But the other one that I think is honestly just incredible is the cashflow they produce, it's got to be the number one best way as a real estate investor to replace your full time income and get a full time cash flow coming in. Now, again, it's just absolutely incredible. There's nothing that I've seen that beats it in terms of cash flow, when you're looking at different real estate, Investing Options, whether it's long term rentals, even storage lockers, all these different opportunities, short term rental just blows them all out of the water. So if you're interested in investing in short term rentals, then I highly recommend you check out that free training because there's a lot of mistakes I see people making and going about the wrong way. So I would highly recommend you check out this training to get yourself started in the right direction. Also, if you're currently investing in short term rentals, you've gotten started, I again, highly recommend you check out that training, I can almost guarantee you that some of the stuff we're going to talk about in that training is going to be insightful to you is going to help you to get a really great improvement in your performance of your investing. So again, highly recommend that you guys check out that free training, I worked really hard on it. And I'm looking to see, looking forward to seeing what you guys think of it. Again, it's completely free, just click the link in the description down below. Now, that being said, let's talk about my personal top criteria for investing in short term rental properties. What is it that I actually look for when I'm going out and buying short term rentals. Now, a quick disclaimer up front is that I'm not sharing any of this saying that, hey, these should be your criteria for investing. Every individual investor is going to have their own individual goals, their own individual outcomes, they're looking to achieve through their investing, I have my goals, you have yours. And so based on my goals, I set up criteria that are going to allow me to hit those goals most effectively. Also, my market determines my criteria as well. So that's another piece. But for you, they might be different. And that's okay, but I did want to share mine because I get a lot of people that are interested and then ask Hey, you know, James, how do you decide what properties to invest in. And ultimately, it's just by following my own criteria. Now the one thing I do recommend is that you as an investor, have your own set of criteria, so that you can quickly and easily figure out if a property is a good investment for you and for your goals. So let's start at the very top because that's really where I look, I kind of have a filtering system for properties I look at. And so I looked at the top level analysis and then as I keep going and get they get past one level of analysis, I go one level further and further and further and make sure they meet the ultimate criteria. Now my top high level criteria is a pretty simple one, it's just that it has to be located in the area that I'm investing in out. For me personally, I like to invest in one single area, just because it simplifies things. Now I have a lot of students, I work with a lot of people that I coach and I mentor the invest in different locations with each property. And that's fine, that can work really well. One of the really big benefits of that method is it allows you to vacation to a whole bunch of different areas. So that can be pretty cool. And especially if you have management companies you're going to work with in each area that can work out relatively well for me, I prioritizes simplicity I want to work with one management company, not three or four, I want to do, you know, have one set of cleaning team, one maintenance person, and I want to understand one market really, really well. Because for me, I need to do a lot of research into the market. And everyone really you need to do a lot of research into the market understand the numbers understand and the risks, the benefits, the opportunities, in order to start investing in that market, I don't have a lot of time to look at all kinds of different markets. So I like to be focused on one. So that's number one is it just has to be in the area that I'm specifically investing in, which is in a cottage country area outside of Toronto. Now, number two is that it has to be a large property, and it has to have the potential ideally to be a larger property than it is right now. I personally like to do strategic renovations on the properties I invest in and make them larger, because that really adds a lot of value to me as a short term rental investor. Now I don't mean making an addition onto the place but I do mean being able to accommodate more people. So I make sure that any property I invest in needs to be able to accommodate at least eight people post renovation. That means it has to have at least four bedrooms and at least two bathrooms ideally more than that. Now the reason for that is that in my market that I'm investing in, that comes with a really huge bump up in ROI because a four bedroom, two bathroom home or a property that's going to be renovated into a four bedroom, two bathroom home or larger is not going to cost twice as much as a two bedroom, one bath home, right, you got a bit of economies of scale when you're buying. So, because of that, it's not a huge difference in the actual price, but you're going to easily do two, maybe even three times more buying that property than he would buying the smaller one in your actual revenue in your income. The reason for that is pretty simple. When you have a property that can accommodate larger groups, two things happen. One, the price elasticity, as long as there's demand for it, the price elasticity is gonna go up, meaning that people are willing to pay more, because you're dividing it amongst let's say, eight people, you know that suddenly that $20 difference in price can turn into 20 times eight people, you know, they're willing to pay every single one of those eight people is willing to pay $20 more than that's not just $20 extra I'm getting it's 20 times eight, I'm getting a huge boost. Their thing is now suddenly, I can justify these really high prices like 800,015 $100 a night sometimes, because again, it's split a ways. So that is one big benefit. The other big benefit is that I get access to a much larger pool of demand. Because my a bedroom or ate my property that can sleep eight people can also sleep seven people or six or five or four, three, or two or one, I have a lot of flexibility so that in the offseason, I can accommodate smaller groups to keep the place booked up. Whereas with a property that only has two bedrooms, your max occupancy is going to be maybe two may or sorry, four to maybe six people who just don't have the opportunity, the ability to cater to larger groups if you want to. So that ends up causing much more revenue to come in on the property. And so my returns tend to be greater. So I know that to be true in my market. And so that's what I look for those are my kind of high level criteria is I just want to look for a property that's in the right area. And that ideally it's going to have the ability or it has to have the ability to have at least four bedrooms and at least two bathrooms. Now some ideal criteria is I want to be near a lake that's a really important is it's near a lake ideally not on a lake though, because on a lake, I'm going to pay a higher premium for buying the property and I'm going to pay higher property taxes. Whereas if I'm near a lake, I get all the same benefits for an Airbnb guests, they can go and access it, they can swim, they can, you know launch a kayak or canoe that might leave there at the property. But I don't have any of the downsides of the additional expenses. So that's another big bonus. And then from there, it's really about running the right analysis, just really digging into the numbers and understanding absolutely everything about how the property's going to perform. That's the last step I take is that I just like to really dig into the numbers, run a full analysis and make sure that I'm going to be able to hit the return numbers that I like to be hitting. So for me cash on cash return I like to aim for in a realistic scenario 15 to 20% cash on cash or greater. If you're not familiar with that term, don't worry about it. Again, you can learn more about all this stuff, you can get more detailed information, all this you can get training that will help you to actually set up your own Buying Criteria down in the link in the description down below. Again, I like to aim for that as my cash on cash return. That's just me. I also like to run a worst case scenario projections. That's something I do in my due diligence period is I go Okay, what is the absolute worst case scenario, and I want to make sure in a worst case scenario, everything hits the fan, everything goes to heck, then I want to make sure that I'm still going to be breaking even on the property, I'm still going to be cashflow, neutral or cashflow positive, meaning it's not going to be costing me money, I'm not going to take my hard earned income and pay the mortgage or pay the hydro, the utility or the internet, I need those expenses for the property, I need to make sure that that at the very least is covered all year round, even in a worst case scenario, because that's one of the biggest things that I see with with short term rental investors is they're all about upside, but oftentimes they forget about protecting their downside. Now if you look at any successful investor, you'll notice that one of the most important criteria they have, if not the most important is protecting their downside. As Warren Buffett famously said, He's got two rules for investing rule number one, don't lose money. Rule number two, refer back to rule number one. Now he's not just being comedic when he says that it really is about not losing money, protecting your downside, even more so than it is about making money and actually getting a great return. You want to make sure that you combine both into your investing strategy. So for me, I really like to put an emphasis on protecting my downside. And then from there, I'll also run reasonable case scenarios and you know, best case scenario projections so that I can figure out what is my upside potential as well as long as all that checks out. Then I'll go in and I'll actually get my offer accepted, go through the inspection actually close on a property, everything else but that's really the criteria. That's really how I decide what properties to invest in. So if you thought this video was really interesting, if that was insightful, if it was valuable to you then let me know by just clicking that like button. Again, if you want more detailed training on all this. It's exciting.
to you for a brand new brand spanking new training down the description down below so I highly recommend you check that out. It's really awesome I like to think at least I spent a few weeks putting it together and try to make it as valuable as possible so make sure that you click the link in the description down below and register again it's completely free so I highly recommend checking that out and then if you liked the video, make sure you give it a thumbs up Give me that like button it really helps me out tremendously with the channel. And last but not least is make sure you hit that subscribe button if you have not done so already and want to make sure you hit it take us I take a minute even hit that subscribe button stamp to date with the channel I post two new videos every single week on the channel. So if you want to stay up to date with all the latest then make sure you hit that subscribe button, hit that like button and I'll see you in the next video.

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