As a preface to this newsletter, I wanted to be clear on what my goals are and what these weekly posts will entail. I am using this newsletter as a way to document my journey of learning the process of real estate investing, and basically dump all the information I have learned into this funnel. I am in no way trying to act as a “guru” or mentor. I am most likely in the same boat as a lot of you reading this, and I think that brings a lot of value. Most investing blogs and videos are all about those that have done it already and are at the top. I want this to be more relatable to the average person who wants to get started, and can follow along with my wins and losses!
Happy November everyone! I can’t believe it’s almost the end of the year. I haven’t even processed 2021 yet and it’s already almost 2022…not cool! Anyway, this week I am going to be talking about some of my ideas i’ve had recently, and what I think the future holds for short term rentals, specifically how they are bought and sold.
If you are a fellow subscriber, and read last weeks Deal of the Week, you saw I teased a little about how that specific property I analyzed is more like buying a business than it is buying a home. And that concept has been coming up more and more to me lately as I go about my search for a property to purchase. So much, that it inspired me to start an instagram called @buyingthebusiness where I find homes on Zillow or other MLS sites that are also being run as airbnb’s. During my ongoing search for investment properties, i’ve stumbled upon dozens and dozens of homes that I analyzed, come to find out they are already being rented on Airbnb or VRBO, further proving my point for potential investment. So if you are interested, feel free to check out my page, @buyingthebusiness on instagram. I’ll be posting my house findings on there a few times a week!
The Rundown
So what does this have to do with short term rentals? Well first off, more and more people have been getting away, renting homes for long weekends/weeks with family and friends ever since the pandemic started. (Here’s a great article explaining those numbers and how STR’s are performing https://www.biggerpockets.com/blog/short-term-rental-market-watch.) On top of increased demand, there is also an increase in supply, as more people are seeing the benefits of listing their homes on Airbnb. Just like commercial real estate, where investors base purchases off of performance, cash flow, and other metrics, these smaller single family homes are (sort of) beginning to have a similar investment strategy.
Here’s a good example: The home I just analyzed on last weeks DOTW showed a 54% cash on cash return, with about $68,000 of cash flow left over at the end of the year. The home is being sold for just under a million dollars, which some people may think is crazy expensive. Which I would agree with—if I was looking at it as a home to buy for my family to live in—but i’m not. I’m looking at it as an investment. As a BUSINESS. Which shows me that this business I am looking at will return me 54% of my money in the first year, and leave me with close to $70,000 of profit. As more and more established airbnb’s put up those for-sale signs, I believe they will begin marketing themselves not just as a single family home, but as a legitimate, successful operation. As the buyer, you are no longer just buying the home, you are buying the business.
Overview
I really think this is a win win situation. The sellers are going to be getting more than they could have imagined for their home, and the buyers are getting a proven short term rental that will most likely continue making them money over the years. With how much the short term rental market has been growing lately, I think we will have these opportunities for the foreseeable future. It is an exciting time in the real estate world, and I think we are just seeing the tip of the iceberg in regards to short term rental growth.
I hope you all enjoyed this weeks newsletter and took something away from it that you didn’t know before. As always if you enjoyed, feel free to share this with someone you know might be interested. You can also subscribe below if you want an extra newsletter every week that shows a full “Deal of the Week” analysis where I pick a property to analyze from start to finish!
