Short-Term Rental Advanced Real Estate Investing Strategy
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There are differences with long term rental investing and short term rental investing. One definitely involves more steps, but has greater reward. Today’s video explains what I mean.
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I didn’t start out in real estate by investing in the more “traditional” long term rentals.
I invest in short term rentals. I see it as an advanced strategy, but that doesn’t mean you need to “build up to it.”
It’s very accessible to both new and seasoned investors alike.
My actual start came from managing short term rental properties for others. Once I saw how much money these property owners were making, I became an investor myself.
In today’s video I’m going to walk through this advanced real estate investing strategy.
First, I want to point out that there are a lot of similarities between STR (short term rental) and LTR (long term rental) investing.
Right up until the point of “launching” the property, most of it is the same.
In the video we discuss the differences between analyzing short and long term rentals. What key areas make up the difference?
We also discuss the differences in renovation. This part isn’t terribly different. Both strategies involve houses and buildings.
I share the difference and what the focus should be with short term rentals.
After that it splits. With long term rentals it’s time to list, screen, and rent.
I finish the video by outlining how to take advantage of listing your short term rental.
What's up guys, it's James here. And in today's video, we're going to talk about short term rental investing as a sort of advanced real estate investing strategy. Now before we jump into that, I do want to say that short term rental investing is the first form of real estate investing that I've actually got experience with. So I actually didn't start investing in long term rentals. Nor do I frankly, recommend that you do, either. I don't recommend that you kind of wait and sort of build up to this more advanced strategy. But I do think that short term rental investing is a bit more of an advanced strategy than say, traditional long term rental buy and hold real estate investing, for reasons I'll discuss later on in this video. And so I just want to kind of put this video together to highlight some of the main differences and why I think it is a bit more advanced. And why you do then just need to take your education, your training, those sorts of things more seriously, because there are a few more additional variables with short term rental as opposed to long term rental. But just to be clear, that's not to say that I think that the right move for anyone or everyone is to start with long term rentals before kind of graduating into short term rentals. So let's jump into it. Now, before we actually dive into and kind of dissect the differences there. And the more advanced strategy, I do want to also let you guys know, there is a link in the description down below for our free training on how to invest successfully in short term rental strategies. So that's probably the first step that I'd recommend for anyone that is interested in investing in short term rental properties, is check out that training and grab our analysis spreadsheet, we're gonna give you a completely free once you sign up and register for that training that will really help you to get started. But really, when you look at short term rental and long term rental investing, compare the two, there's a lot of similarity pretty well, everything right up until actually launching the property is quite similar. And with the main exception, and not, I guess that front end of the process of actually analyzing properties. And that's to say that you do analyze properties, whether you are managing them or investing in them for long term rental or short term rental, but the way that you do it is quite a bit different. But if you actually to zoom out and look at it, you know, buying a property actually going through offering closing is going to be relatively the same whether it's a short term rental or a long term rental property, renovating that property, there are going to be some small differences, but a lot of it is going to be very much the same. And then actually getting the property kind of furnished and rent ready and everything beyond that, that's going to be where the process mainly differs. So let's kind of break things down. Now, like I mentioned before, you are going to need a bit more kind of depth of knowledge and expertise when it comes to analyzing properties for short term rental than long term rental. In either case, you need to really know your numbers need to have the right tools like an analysis spreadsheet that I mentioned before, in order to properly run the numbers, analyze what the investment is going to look like, and assess what the overall return is going to be what your cash on cash return is going to be all that stuff. The main difference, though, is that with a short term rental, you obviously should have a much higher bar for your cash on cash return it should cash flow much better than a long term rental property. And the other big difference is that you need to really understand how to actually gather that data, it's a lot easier to gather comps for a long term rental and just look at what properties are going for in that area and get a pretty relatively accurate idea of what the property is going to rent for and then assume a pretty industry standard vacancy rate on the property. That's all pretty straightforward. With short term rentals, it's a little bit more involved in that needing to know exactly what your specific property that you're looking at, is going to be able to generate on a 12 month average basis, what the seasonal fluctuations are going to be with that what the occupancy rate is going to be in order to get there so that you can accurately assess the expenses like cleaning fees. So there's a lot more involved. There's also more on the expense side of things, because you need to make sure that you're covering all of the different costs that a tenant would typically cover, like your utilities and your net, all those sorts of things. So the analysis is more involved. And then from there, you're going in offering closing is very, very similar. And then going through to actually renovating, the only real difference with renovation is that you're going to be taking into account. In addition to increasing the value of the property, you're always going to want to think about what could potentially increase the book ability of the property make it more desirable to short term rental guests, which is going to be slightly different than what's gonna be more valuable to tenants to long term people staying there. And then from there, that's where things really start to veer apart where normally in that situation you would renovate and then list it as a long term rental. Now you're actually gonna take that additional step of furnishing it and then go to list the property as a short term rental or hire a property management company who's going to take care of those elements for you. In either case there is there are just a lot more moving parts as you can imagine, it's a lot more kind of involved to have, let's say 100 Guests staying at your property throughout the year as opposed to one single guest paying you to stay at your property all through A year. And so the more short term your stays get, the more moving parts there are, the more turnovers there are going to be, the more maintenance there's likely going to be when so you just need to have your operational side of things really dialed in. Now, obviously, the big payoff on that is that your cash flow is going to be much stronger in a lot of markets that we're investing in with short term rentals. If you were to buy properties, and specifically look for long term rental properties in those markets, the cash flow from those properties would only just be able to cover the actual carrying costs and expenses associated with that property. So you'd be in a only slightly cashflow positive situation on the property, let's say you be cash flowing on a half million dollar property, maybe two to $300 a month in those markets that we're investing in. Whereas with those properties, we can, like I said, cashflow about $80,000 a year with a short term rental. And so if there are specific markets that you're looking at, that you want to be investing in, then short term rentals may be the only option that makes sense. Now, obviously, you can do a lot better on long term rental than the numbers that I just talked about, you can pick up properties that have a good cash on cash return of let's say 10, maybe even 15% with long term rental, but they're few and far between. And usually they're not the best areas that you're going to be investing in. And so in any case, you're going to be able to well blow those numbers out of the water when it comes to short term rental investing, where we're very commonly seeing 1520, even 30% cash on cash return or more. And the real kind of unicorn properties are those 40 and 50% cash on cash return properties, which are still out there, they're just a lot less common. And so really, that's the trade off is there's going to be more moving pieces. So you need to make sure that you have your systems and processes all dialed in. That's why working with a mentor or working with a coach working with training is going to be really beneficial, because there's just more opportunity to make mistakes along the way. Because all of that additional opportunity comes with potential to make mistakes along the way. So the payoff is that you're going to be able to instead of, you know building up a portfolio of long term rentals over the next five to 10 years to get to a point where your cash flow from those properties has replaced your full time income. You can buy one single property as a short term rental and have it bring in enough cash flow to replace your full time income and easily quit your job within the next six to 18 months depending on what your income might be and what your ambition is to leave that everything else. So the short the the timeline to actually achieving your financial goals, especially if they are cashflow related, is much much much shorter with short term rentals than long term rentals. On the flip side, though, there is just a bigger learning curve, there's more opportunity for mistakes, it's a bit more of an advanced strategy. So here's my recommendation. This is what I did this is what I recommend that other people do is that they start with short term rentals. But start going in really understanding fully appreciating how much more opportunity there is for mistakes when you're starting that investing journey. And so as a result, you really want to lean on different tools and resources, whether that's working with someone like myself and working with us in a mentorship capacity, you know, having all the experience of different tools, I see too many people rushing into short term rental investing, and thinking it's a lot easier than it is. Now it's not to say it's incredibly time consuming. One of the things I love about short term rental investing is that you can manage properties in just a few minutes or a few hours each week to set depending on the number of properties that you have. So it doesn't really have to take up a lot of your time, once you have the systems and the people in place to help you with managing them. And it can be very, very profitable. But again, I really think that a lot of people just get into it too quickly, assuming it's going to be a lot easier than it is having something be relatively passive and relatively easy are two very, very different things. Yes, it can be very passive. But no, it can't be very, very easy it is challenging it is you do need to have an understanding of a whole bunch of different moving pieces. And so you don't want to underestimate that and just assume that whatever property you buy is going to do incredibly well as a short term rental. And there are a lot of people out there that are talking about how incredibly easy it is and how, you know incredibly easy to just find amazing properties. And I just haven't found that to be the case. I've analyzed, you know hundreds of different investment opportunities at this point investment properties for short term rentals. And the reality is that although most properties will be okay, as short term rentals, very few are going to be absolute knock out of the park homerun properties. And so if you want to find those homerun properties that are actually going to do really, really well. You need to understand how to find the right markets, how to find and analyze the properties that are going to be the best and make sure that you have the right criteria for them. How to make sure that you're renovating and setting them up for success, how to manage the listing and optimize pricing all those different pieces you really need to get up to a level eight or level nine out of 10 If you don't don't want to be leaving opportunity on the table and potentially making mistakes that are going to cost you a lot of money. Again, all of this revolves around just achieving your goals in a much shorter amount of time than you otherwise would have. And so for me, personally, I prefer to do the work on the front end to make sure that my timeline is going to be much shorter, and make sure it's gonna be a much smoother path to that than doing the work scattered out on the long end when I'm making mistakes and losing a lot of money in so doing. So hopefully, this has been helpful for you, if you've been considering kind of sitting on the fence about whether or not you want to get started with short term rental investing, I do definitely recommend it. It's an incredible strategy. It is my favorite form of real estate investing. And I highly recommend that if you go down that route, you go in eyes wide open, realizing there are going to be challenges, there are going to be knowledge gaps, and you need to fill those and make sure that you're doing great job. So again, hopefully this is helpful for you, if you want to work with us and learn from us about how to invest successfully in short term rental properties. If you want to get started with some training that's going to walk you through step by step by step, the most important things to kind of check off and make sure that you're not making mistakes on just check out the link in the description down below to our free training, it's completely free of charge, we're going to walk you through everything step by step and also give you our analysis spreadsheet that we use for analyzing every single one of our deals, all of that completely free. So make sure that you check out the link in description down below for that. Also give this video a thumbs up, make sure you hit that like button. If you did enjoy the video, if you got value from it, I really, really appreciate it, it means a lot to me, it helps me to understand better what you guys like and what you want to see more of. And it also helps to get these videos in front of more people. So if you could just take a quick second. There you go. Hit that like button, it really means a lot to me. So I really appreciate that. And also make sure that you hit the subscribe button if you want to stay up to date with the channel which obviously you do because he post two new videos every single week and try to jam as much value into them as possible for everything to do with short term rental management investing, you name it, we covered it, so make sure you hit that subscribe button as well. Take your time, hit the subscribe button. And then if you have any questions, comments, thoughts, as always let me know in the comment section down below. That all said I hope you have a fantastic rest of your day and I'll see you in the next video.Expand