The Best Airbnb Renovations for ROI

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What's up, guys, it's James here. And in today's video, we're going to talk about how you can hack at Airbnb in order to get massive ROI on your real estate investments. I'm going to talk to you about the number one thing that I look for in short term rental properties when I'm investing, and I'm going to tell you about the number one most valuable renovation you can do for your short term rental property. So with that being said, let's dive into it. Before we do, I just want to remind you, there is a link in the description down below to a free training video that's going to walk you through step by step by step exactly how to succeed investing in short term rental properties, I'm going to share our three fundamental pillars for how to invest successfully in short term rental properties. And I'm going to give you completely free access to my own analysis spreadsheet that I actually use for analyzing every single deal. It's a great spreadsheet, we've used it in other videos and demos in other videos. And it's basically going to allow you to really analyze properties effectively and figure out which ones are the best buy. And that's exactly what's gonna allow you to implement the strategy that I am talking about in this video. So let's jump into it. Now, the number one hack that I have found that is just insane for investing in short term rental properties is figuring out where you have the big jump, what I call it, the big jump, and it happens at different points in different markets, depending on what market you're investing in. But in pretty well, every market I've come across, there is a big jump, and I'm gonna explain exactly what that means. Now, there's a theory or a strategy when it comes to multifamily investing that's based on the principle that if you buy multifamily properties, you know, a duplex a triplex or a four Plex as opposed to buying a single family home, you're going to get better returns on your investment, because you won't pay proportionately more in purchase or in renovations for a triplex compared to if you were to buy single family homes, let's say three single family homes. Now the reason for this is pretty simple. And we're one you don't need to buy three different plots of land, it's just one. Number two, you don't have to buy three different structures. So you're not buying three different rooms, you're not buying three different HVAC units, you're not buying three different everything, right, you're just buying one, but it just happens to have three different units that it's being leveraged on. And then the last one is that you again, then don't have to maintain three different rooms, three different HVAC units, everything else. So you can get this sort of economies of scale that happens. And this applies to multifamily investing. This is why people tend to invest in larger real estate deals with multiple units, as opposed to investing in single family homes. And this is largely applied throughout long term rental property investing. And so we can take a really similar concept and actually apply it to short term rental investing. And this is where what I call the gap comes in. And so what this how this kind of maps over to short term rental is not directly apples to apples, because if we buy a multi unit property, it tends to not be great for short term rental for a few different reasons, the main one being that you're going to oftentimes have disturbances between the different units. So it's not really ideal for that. But what you can do is apply the same principle, but instead of buying multiple units, you know, multi unit property, you're going to buy a property with multiple bedrooms. Now this might sound confusing, but let me explain. If you think about it, a a one bedroom property, let's say in any given area, pair that take the purchase price for that and compare it to the purchase price for a two bedroom property, you know, ask yourself now, do you think that the two bedroom property is going to cost twice as much as the one bedroom property, in most cases, not at all. Now, if you think about a four bedroom property is it going to cost four times as much as the one bedroom property or two times as much as the two bedroom property not at all right? In most cases, you're not going to be paying proportionately more for that additional bedroom. Now the other thing to take into consideration is that you also with four bedrooms, you don't have you know any less or more rooms to take care of you still have one roof in either scenario, that's going to cost roughly the same amount. Assuming that the sizes are relatively similar, even though obviously, you're going to have a you know, a four bedroom property is going to be larger, it's going to have a larger roof, but you're knocking paying four times as much to replace the roof on that in terms of maintenance perspective, right. So your maintenance costs are again, not going to be much lower on that one bedroom property compared to the four bedroom property not proportionally more, not four times lower on the one bedroom property. So you're going to be able to buy that four bedroom property for less than four times as much, but and you're also going to be able to maintain it for less than four times as much as the one bedroom property. Now let's look at income, are you actually going to be able to generate four times as much income on that four bedroom property as you would on the one bedroom property and this is where it gets pretty interesting is that in a lot of cases the answer there is actually yes. And again, this is finally where the gap comes in. What I found is that in most major markets or even secondary and third markets, most markets overall, you'll see what I call the gap when you're analyzing properties. And this gap is the place where the kind of section of the market where there's just low low competition and therefore disproportionately higher returns. So I'll explain it a little bit more detail. If you analyze the numbers, we've talked about how to do this in a number of other videos, but if you actually just analyze the numbers on one bedroom, two bedroom, three bedroom, four bedroom properties in a given area, you're likely going to find a small incremental increase from let's say, one to two, another incremental increase from two to three. But somewhere between either three and four, or four and five, or five and six, at some point, there's going to be a big gap, a big kind of leap, where suddenly you'll see well, you know, this three bedroom property can bring in $50,000. But as soon as we go up to four bedrooms, now it can bring in $90,000, what the heck happened there, how is it that we can bring in almost double the amount of income just by adding one additional bedroom. And the reason for this is pretty straightforward and simple. The reason you can bring in so much more on that one single marginal bedroom that one additional bedroom, is because once you do that you now are catering to in this case, eight guests, if you have a four bedroom property, you can safely accommodate eight guests, maybe even more multiple bathrooms, and you've got a plug couch in the living room. So let's say eight to 10 people, well, now suddenly, there's just that at a certain point, depending on the market, again, this will depend on the market, but you're going to hit an area where there just isn't a lot of competition. So in a lot of markets, that tends to be at four or five or six bedrooms, where you tend to then out of competition. So if you have a group of eight people, let's say who are looking for a place to stay, they just have very few options, meaning that your property is going to get booked up a lot more, just because it's one of the very few options that groups of that size have when they're choosing a destination to stay at in this area. Another big factor here is that that four bedroom property can also accommodate smaller groups. So it has the flexibility that you can lower your rates. And you can easily fill up any openings, any vacancies you may have in your calendar with groups of three people, four people, etc. The other factor that's at play is that larger groups are generally willing to pay a lot more for properties when they stay in a group, because they're justifying that cost by splitting it amongst the different members of the group. So $800 a night on a property that sleeps eight people is an outrageous because it's really $100 A night per person. Whereas $800 A night on a two bedroom property is a lot more unreasonable, you're just not going to find as many people that are willing to pay that amount. So you generally just end up being able to charge a higher premium, you're able to get your property booked up more, and you're able to cater to a segment of the market that's being underserved. So that means that now suddenly, you just have a lot more opportunity, and you're gonna see that gap. And that gap is not relative, it's not related in any which way to the purchase price of the property. So that's really where you get this disproportional outweighed return here as an investor's because you're not paying substantially more to get a four bedroom as opposed to a three bedroom or a five bedroom as opposed to a four bedroom. But you are generating substantially more in revenue as a short term rental property. Now, that's also why the number one biggest hack that I use when renovating properties is to add additional bedrooms and or bathrooms. So if I see a property that's got three bathrooms, let's say but has only four bedrooms, I know those three, those three bathrooms will allow me to accommodate, you know, anywhere from 12 to 15. People generally. And so I should be adding some bedrooms if I can some sleeping space for other people. Because I've only got these four bedrooms, well, let's go ahead and add another couple of bedrooms if we can, if possible, let's even add more bathrooms so we can accommodate more people, because those are the renovations that are really going to allow you to get a better return as a short term rental property. Because again, it allows you to just accommodate more people, which opens you up to a bigger segment of the market gives you more flexibility in who you can, who you can allow in your property. And then also you can charge a higher nightly rate. So this is really the number one biggest hack that I've found for investing in short term rental properties, I would encourage you to check out the training down in the description down below so that you can learn how to do this kind of analysis in an area for yourself. And you can actually fact check me on this going and run your analysis. And I'd love for you guys to run this type of analysis. Again, if you want to learn how to run the analysis, the link is in description down below. It will even give you our analysis spreadsheets so that you can run the analysis properly. And I would encourage you go and check it out. Make sure that you go and run the analysis like this in your area and tell me did you find a gap? Did you find this gap in your area that I'm talking about? And where is it you know what types of properties in your area
are the ones that make the most sense? What size? Is it? Really excited to hear your comments in the comment section down below. Other than that again, just make Make sure you check out that free trans LinkedIn description. If you like this video if you got value from it if you like this tip, then make sure you give me a like hit that like button give me a little thumbs up on the video, it does help me out a lot as I'm growing this channel. So I really really appreciate if you just hit the like button there. And then last but not least, I will ask you to subscribe to the channel because I know myself when I'm on YouTube, I oftentimes will watch a person's video and think I'm subscribed and realize that I'm actually not I just watched their videos a bunch. So make sure you actually subscribe because I know I look at my YouTube analytics and I know a lot of you guys that watch these videos each week are not actually subscribed to the channel. So just make sure that you actually check it out. Just hit that subscribe button. I promise it'll be super valuable. We're posting two new videos every single week and my goal is always to deliver as much value as possible. So make sure you hit that subscribe button so you can stay up to date. All that being said Have a great rest your day and I'll see you in the next video.