The biggest mistake investors make with short term rentals
Start Growing your
BNB Business Today!
Get inside access to our professional courses, hosting community, and much more!Get Started for FREE
Learn the biggest mistake of short term rental investors. This video goes over the three types of this mistake and what you should do instead. If you’re buying an Airbnb soon, watch this video.
FREE TRAINING:. Learn how to invest in short term rentals
FREE TRAINING: Earn a full-time income managing other people’s properties on Airbnb:
FREE TRAINING: Become a top performing host on Airbnb:
FREE DOWNLOAD: Get your free profitability projection tool:
AIRBNB FOR DUMMIES:
In this video I will share with you the three major problems short term rental investors run into when analyzing a deal.
If you’re new to short term rentals or coming from a different area of real estate, this video is for you.
First, I will outline the dangers of not doing any analysis at all.
Unfortunately I see this a lot.
People will either take a best guess or just assume, with nothing ever being written down.
It’s true that we’re not all “numbers people” but if you want to succeed in real estate, you MUST get comfortable with numbers.
Next, many investors just plain use the wrong numbers for their analysis.
This problem happens a lot with investors coming from the long term rental space. Finding comps is not the same process, and in the video I’ll share why.
I’ll also share with you a website you can use to find your data.
Finally, some investors have the right data but use the wrong systems. I go over how to find what places are being rented for in your area.
These mistakes can turn a good deal into a bad deal.
Sometimes, they can become a very bad deal.
And these mistakes can put a big dent in your nest egg 20, 30, or 40 years down the road.
And finally, I give you my straight advice on what to do if you’re not comfortable with analysis just yet. (You’re not going to like it.)
SUBSCRIBE for more!
Unknown Speaker 0:00
What's up guys, it's James here and in today's video, I'm going to talk about the number one biggest mistake that I see people making when they get started or when they're currently investing in short term rental properties. This is a huge mistake that I see people making that leaves them huge money on the table, it also costs them I see people losing 10s of 1000s of dollars because of this. So I'm going to break it down for you in this video. And before we dive in, I want to let you guys know about a really exciting announcement that I have for the channel and for everyone here is that I've recently put together I worked for a number of weeks to put together a free training that's going to walk you through exactly how to successfully invest in short term rental properties. This specifically focused on buying properties. If you want to buy properties invest in properties for short term rentals, so use them as Airbnb as vacation homes, then I highly recommend checking out this training, This training will walk you through the three critical components the crucial steps you need. I've now worked with a number of different real estate investors, helping them to invest in short term rentals. And I'm actively investing in properties myself, and co investing with other people. So I've learned a whole lot and I want to share my best practices, I want to share with you exactly what you need to do in order to invest successfully in short term rental properties and make sure you're not losing money and you're maximizing your returns. So if you want to learn more about that, then the link is down in the description below. You will not want to miss this training, it is brand new, and it's not gonna be around for long, so make sure you check it out in the link in the description below. Now with that out of the way, let's go ahead and jump into this video. And let's talk about the number one mistake that I see investors making. And to be honest, I see investors first time investors brand new investors make this mistake. But I also see veterans making this mistake, which honestly kind of blows my mind. But it just goes to show that you really even if you do have experience investing in other forms of real estate, whether it's multi residential, you're doing flips, maybe you're wholesaling whatever it might be. If you're investing elsewhere, that doesn't mean that you have all the know how to go and invest in a different type of real estate being short term rentals. So you want to watch out for that I see a lot of people that are more veteran in real estate, they're still making the same exact mistake. And it's a huge one, it's a doozy. This one costs you literally 10s of 1000s of dollars, if not hundreds of 1000s of dollars depending on just the extent to which you make this mistake. And so really what this mistake is, is it all comes down to lack of proper analysis. And I see a breaking down to a couple different kind of categories. I see some investors that just lack the proper analysis in the most brutal sense of the word, they just literally don't actually do the analysis, they don't run the numbers effectively. And then I also see some people running the wrong numbers. And then I also see people that are running the right numbers the wrong way. So they're, you know, doing the right the right approach doing the right analysis, but they're doing it the wrong way. So they're getting bad data into their analysis, which is causing inaccuracy. And any one of these can be very, very detrimental if you look at it, because it can turn a good deal into a bad deal like that it
Unknown Speaker 3:07
can be really, really detrimental to your investing. And any deal that you get in early on that has, you know, that's going to really impact your long term growth prospects. So if you lose $10,000 on a deal right now, you know, for some people that might not be very significant you might look at and go Oh, it's you know, cost of learning not that big of a deal. But if you look at the, you know, 20 3040 year value of that money, if it's invested properly, you're literally knocking hundreds of 1000s of dollars off of your nest egg. So that's why I really want to address in today's training. And I want to talk about each different one of these categories. I also want to share with you the end of the video here, what you need to do to make sure you are running proper analysis on these properties. And you're getting these diamonds in the rough you're finding the best deals out there that other people aren't seeing. So the first thing that I see that's gonna be really easy to address is just, you know, people not running the numbers. There's a few people out there that I come across, they'll talk to me, and they basically just go and use their best guess and they just kind of buy a property that they think will do well on Airbnb, they look at it and they go, Well, this market looks like it's good. And this property it looks like it would do really well on Airbnb, so I'm just going to go and snatch it up and buy it. That isn't awful strategy, subscribing to this idea that real estate is always a good investment. That right there is a really, really bad mentality to have because there are lots of people that have lost their shirts to real estate deals gone bad. So you need to be really diligent real estate always can be a really great investment. If you're investing properly if you're analyzing your deals the right way. So do not let yourself fall victim to that trap and become one of these people that just, you know guesses and doesn't believe in analysis or doesn't utilize analysis. You know, really what you have an opportunity to do here is stack the deck in your favor. Think of real estate like a card game where you have the ability to stack the deck in your favor. And if you're not doing proper analysis, then you're not doing that you're just choosing to go and play your odds at the table, and the house always wins. So next,
Unknown Speaker 5:10
let's talk about people that run the wrong kind of analysis. This is what I see pretty often with people that are coming from a long term rental investing background, or they've already been learning about long term rental investing, and they just are running the long term rental investing numbers, and then figuring Well, if I do it on short term rental, then hopefully you'll do even better than that. Well, that's also the wrong approach. And sure, if you run the long term numbers, and it makes sense as a long term rental, then you have that to fall back on. So that is great. However, you are leaving a whole bunch of money on the table by not actually looking at the short term rental data. Because if you look at the short term rental data, you'd be able to find properties that not only have a good fallback plan as a long term rental, but also are incredible high performance a short term rentals. So although you may have that nice backup plans, that mean that your downside is protected, you're not really maximizing your upside there, because you're not looking specifically for properties that are geared to do exceptionally well as a short term rental. Now, number three, the big mistake that I see people making as far as not doing proper analysis, the third kind of way that that shows up and manifests itself is people running the right numbers, but using the wrong data to influence those numbers. So these are the people that have the right tools for analysis. They've got the right approach, but they're going and just for example, looking at Airbnb, they're comparing their property performance, they're basing their occupancy rates, they're basing their nightly rates on other properties on Airbnb what they're seeing those rates. This is a massively flawed approach for a number of reasons. Number one, first and foremost is that your numbers are going to be about 15% too high right off the bat, because you're not factoring in more often than not, the 15% or so markup that Airbnb adds to these properties. Airbnb has to make money. So there's a chunk of what you would see as a guest. If you're looking at a property as booking as a guest, what you see is a price is not what the host actually ends up within their pocket. So there's that inflation, that's going to happen in your numbers just because you're looking at Airbnb. Now the other thing is that you're looking at a biased data set, you're looking at the data for properties that have not been booked, because if they are booked, you wouldn't be able to find them for those dates on Airbnb. So if you're looking at all the properties that haven't gotten booked, then you're probably again, looking at prices that are overinflated, you're looking at only one part of the data. And that's going to lead to your data being inaccurate. Now the other big flaw with this is that a host on Airbnb can set their price at whatever they want, I can literally go right now on my property and I can lower my price down to $9 a night or I can rack it up to $9,000 a night. That doesn't mean that $9 or $9,000 a night is the optimal price to set it at, it just means is what I decided after I had whatever I had for breakfast today that I wanted to set my price at. And because of this, you really need to make sure that you're looking at data on what properties actually got booked for not what the host is setting the price at because ultimately that number is really just whatever number the host had in mind. So in order to do your analysis, effectively, if you want to run proper analysis with the right data, you need to number one, do the analysis in the first place. Number two is you have to have the right tools and systems to run analysis specifically for short term rentals. And you need to have the right tools and insights and training to be able to figure out which properties exactly in a given area perform the best on short term rental. And again, that's all stuff that we talked through. And we actually give you some tools, we walk through all that stuff inside the free training link down below. So I'd highly recommend that you check that out. Now the last thing you need is you need the right data to put into these analysis tools. Because at the end of the day, if you run the right analysis, but with the wrong numbers, then you're just getting crap in crap out. So what you need to make sure that you do is go to data mining websites. So for example, err DNA is a great one that people a lot of people are familiar with nowadays, that is a site where you can actually go and grab the data from how listings are actually performing, what they're actually getting booked for what the occupancy rates really are. And you can see exactly what a host is actually earning not what the price is set at but what it actually gets booked for. Now if you use those tools, you also need to know how to use them because not as simple as just going in there plugging in some numbers plugging in an address and it'll spit out projections for you, you need to be able to actually manipulate that data and know what it means know how to use it to formulate the right projections. And again, all that is again stuff that we talked about inside the free training link down below. So once you take all those steps once you run the right analysis with the right numbers in the right way, then you'll be able to actually identify these diamond in the rough properties, the ones that are going to give you a massive ROI. Until then you'll want to stay away from short term rental investing and not touch it with a 10 foot pole because you're more likely to lose your shirt, it's you know, then then anything else because
Unknown Speaker 10:05
ultimately, if you're going into any form investing without properly educating yourself, you're really just gambling it's not investing at that point. It's like kind of looking at a chart of stocks and just grabbing whatever one you like the ticker symbol for, that's not investing that's just gambling you're just taking your best guess at it, you're throwing a shot in the dark and it's more likely to end up being a loser than it is to be a winner. So if you want to equip yourself with the right tools, the right strategies, the right systems to be able to actually become an investor a diligent master get great returns on your investment and get incredible cash flow from your properties then I highly recommend again, checking out the link in the description down below. That's where we link that free training I just put together walking through all the steps of how to successfully invest in short term rentals. I hope this video has been really really valuable to you if it has, give me a quick thumbs up hit that like button it helps me a lot with the channel I try to bring you as much valuable content these videos as possible. So just make sure you hit that thumbs up button. Give me a like on the video. Really appreciate it and I'll see you in the next one.