Tune in to Episode 2 on Apple Podcast or Spotify to learn how to find the right place to invest in an Airbnb to guarantee cashflow!
Are you looking for a way to generate cash flow outside of your current job? Have you thought about Airbnb investing, but been afraid to choose the wrong place in the wrong market and lose your hard-earned money? Do you wish there was a “silver bullet” to feel truly confident in making a short-term rental investment?
If so, you need to listen to this episode where we share our exact system for finding your “where," drilling down into the hard market data, and knowing BEFORE you ever invest how much money a property can cash flow.
After listening to this podcast, you’ll understand exactly how to find a profitable Airbnb market near you. You’ll also learn which software we use to find and make our investment decisions, and the ideal size of market to reap the largest return on your investment.
Tune in to learn how to be confident in finding and making an Airbnb investment that will cash flow!
Topics discussed in this episode:
- How to begin looking for an Airbnb market
- The ideal size of a market/town/area for maximum return on investment
- What free platform to use to begin learning more about a market
- Which free software gives you hard data on the location, nightly pricing, and occupancy of other Airbnbs in your market of interest.
- How much you can expect a property to gross based on top-line revenue
Show Notes:
You're listening to the Host Coach show, the podcast that guides Keller William agents to achieve financial freedom through Airbnb investing so you can feel comfortable in your investments, generate maximum cash flow and live a life that you love.
My name is Culin Tate, and my name is Danielle Tate.
We grew from one Airbnb property to 10 in just five years, and now gross over a million dollars a year while working less than any other jobs in our lives. We can't wait to help you do the same.
Today we're talking about how you can find exactly where to invest in an Airbnb to guarantee cash flow, because that's the big problem for most people. If you've considered a short-term rental, Airbnb property investment, where do you get started? Where are you going to buy this place? What makes sense?
Where am I going to make money? And what are the first steps to evaluating that market and finding the right place? And there's always the fear, like what if I pick the wrong place? What if I find a super cute cottage that I love but no one else does and no one comes? And now I have not one but two mortgages, and the thing that was supposed to give me financial freedom is draining my bank account and freaking me out!!
Alright, so this episode is going to take you through exactly how to find the right place for you and evaluate its cashflow opportunity. We like to call it finding your where.
Which also starts with finding your why. Why do you want a short-term rental investment? Are you interested in owning a place at the beach that you want to pay for itself? Or are you interested in trying to create maximum cash flow and return on investment to create financial freedom through a new cash flow?
I talked to so many different Keller Williams agents as we were starting to create this podcast to really understand who our tribe was and what our tribe was looking for.
And one of the words that kept coming up again and again was cash flow. Cash flow. I want to generate cash flow. So while, as Culin said, there's lots of ways to have financial freedom, whether that's just more time with your family or a beach house that pays for itself. We're going to focus on cashflow in this particular episode.
And what we found through our own investment career is that within one to three hours of any major metropolitan area, there's a place. There are places that people like to go to get away, particularly after Covid. People are looking to get away from the city. They're looking to get away from working in their own home and working somewhere else.
So this phenomenon of finding properties a couple hours away from where you currently are is an opportunity. t's the opportunity to find your where. So when we're talking about finding your where, people are like, well, I don't know. We tell them, think about, where do you like to go for the weekend?
If you're getting away with your partner, with friends, with family, and you aren't flying somewhere, you're driving somewhere, where do you like to go? For me, if I'm planning birthday parties, it's somewhere with wineries, somewhere with great restaurants, somewhere with a view. But, for other people, it's skiing, it's lakes, it's rivers, it's fishing, it's hiking. There's all these endless activities that aren't available in an urban setting.
Think of a place where have you been in the past that you really enjoyed? We've all been on that vacation and been somewhere and been like, I'd love to have a place here. This would be the perfect place to come back to. You know, we have to have that passion. I tell people all the time not to start with the lists of the best short-term rental investments, locations. Start with a place that you are passionate about. You're gonna spend some time there. You're gonna wanna spend time there.
And the old expression, the money follows the energy. If you have energy about this location, if it's a place you're passionate about, the money will follow. And it makes it easy to be a great host. one of my favorite parts of managing our portfolio is talking to people one off that are like, oh, I'm proposing, is there a particular hike with an amazing overlook, and of course I know where it is. Or it's my mom's birthday, is there a place that we could go for dinner or a place that makes picnic baskets and is there a spa? So if you're in a place that you love and you love doing things, it's going to be really easy to curate the experience for your guests.
Exactly! And if nothing's coming to mind, here's a couple of other tricks you can brainstorm with a friend. You can brainstorm with a significant other. If that's still not working, just go to Google. And ask, what are the best three day weekend? What are the best weekend getaways? What are the best romantic getaways from my town?
And Google and TripAdvisor will have lots of articles on places that you could start to investigate and see if they fit your preferences. So it doesn't have to be scary. the investigation stage can actually be a lot of fun because you're looking at beautiful places. And of course there's the investment aspect, but there's the fun aspect
too.
And most people I've coached through this process usually start with a list, a short list of two or three places, and then the next question becomes, well, how do I now begin to evaluate whether that place that I'm excited about: that ski resort area or that mountain winery area. How do I evaluate whether that could potentially be a good market for Airbnb investment?
The first thing to do is just to go directly to Airbnb, plug in the name of that town and see what comes up in the results. Are there four or 15 properties in that area? We like to see between more than a hundred, less than a thousand properties come up in that search. If it's just three or four, then maybe that's not a market that's will support the demand for a high-return Airbnb. On the other side, if it's a market like say Miami that's coming up with thousands, then it's gonna be hard to stand out.
And in a saturated market, it is hard. It's possible. We definitely have clients that have done it, but it's a little bit harder if you're looking for the big cash flow return on investment, to make that happen.
So, once we've jumped that hurdle, that quick look on Airbnb, the next thing we're gonna do is recommend a tool called AirDNA. And that tool is now free and you can plug in the zip code or the town that you're looking for, and Air DNA will come back with lots of great data for free about that market!Things that include, for starters, just an overall market score. It's out of a hundred.
To give you a little background, dear listeners, we are, both previous entrepreneurs in tech. So when we make decisions, having data is how we make great decisions and how we coach our clients to make great decisions because there's definitely gut instinct, but when there's tangible numbers and facts and metrics to apply, it makes it a lot less scary to make an investment, especially your first investment.
Digging down in AirDNA. Beyond that overall market score, there are some factors that go into that score. Three of my favorite are market investability, regulation, and rental demand. So rental demand's pretty obvious. What is the demand in that area on a score of one to a hundred?
Rental Investability is again, a favorite because it compares the cost per square foot to acquire the property versus the average daily rates and the average monthly income that is being associated with those properties. And that's all aggregated data. From there the next really important piece from Air DNA is the average daily rate and the average occupancy within that market. Keep in mind, these are averages, right? So the average daily rate is the rate across the whole market that properties are renting for on a nightly basis.
The next is occupancy. Don't be afraid if you see an occupancy number in the 50 or 60% for a market that is pretty typical. It's very typical in the markets we invest in. But, we're gonna show you in later episodes how the secret to success is to price your property for occupancy that is in the 85 95% range.
It sounds crazy. It's hard to believe, you're like, sure, of course you're going to teach me how to do 90%.
Our number 10, Airbnb just went live in October, and I was nervous because it was my pick. We kind of go back and forth and it was outside of our typical market. We had done all of the analysis. We had used Air, DNA, we had, calculated everything out, but it was still in my heart, a little bit of a risk. And it's booked solid!
We keep turning up the prices and it's consistently booked. We have two nights open in the month of November. So it works. It happens in all markets and having the experience of not just our market and outside of our tiny market, but in coaching people from all over the United States and actually all over the world, using these tools and metrics consistently shows that they work.
And that makes it so much easier to say, yes, you should invest there. And yes, it is going to cash flow. And yes, this is your key to financial freedom. Go do it!
And then the next question might become, what are all the rest of the risks? How do I start to build out and understand if this property is going to actually make money?
So we talked about the average daily rate and average occupancy. We can multiply those two out and get a estimate of the monthly income.
So once you have identified a couple of markets, the next thing to do in Air DNA is to start looking at potential properties that are listed for sale. This is a recent addition in air DNA that actually shows you real properties in that market for sale.
Which may not be that exciting for you as a Keller Williams agent, but if you're helping your clients through the process of looking for a Airbnb investment property, it lets them do some of the work and feel a little bit more involved and saves them from asking you for comps from 17 different towns.
And this may not be a property that you ever end up buying, but it starts to give you a feel for what the properties in that market look like and what their price points are.
I don't think we've said it yet, but we typically invest in stand-alone cabins and we look for two to three bedrooms. We do own bigger places, but through constant analysis of our own portfolio, the sweet spot is the two to three bedroom because for the same amount of effort as having a one bedroom, you get the added fees of additional guests and amenities, et cetera.
So how much money we make isn't always how much money we make.
Meaning, we can generate say, $6,000 a month in income. But you might be asking and wondering to yourself, what are my expenses going to be? So obviously in a short-term rental, we're covering the mortgage. Our next biggest expense tends to be our cleaning fees. And then from there we're also covering, all the utilities, the internet service, repair, maintenance, those types of things.
In a podcast, it's a little hard to detail all those. We'll go ahead and drop a link in the show notes to a worksheet that I have that shows our complete proforma P&L calculator.
Everybody likes a good tool and there's no need to reinvent the wheel, especially if it's a spreadsheet. As a rule of thumb, in talking to a lot of first time short term rental investors, about 50% is what comes down to that bottom line.
So if it's $6,000 a month in top line revenue, after mortgage, after cleaning fees, after utilities, a good rule of thumb is you'll probably see about 50% of that coming to you in cashflow.
And $3,000 extra a month goes a long way. It's a building, financial freedom, whatever that looks like.
Financial freedom. I always see it in big capital letters, FINANCIAL FREEDOM. And I don't know, maybe as a woman I look at financial freedom, hitting my forties and having a teenage son instead of little kids. For me it's time. Financial Freedom, yes, is money to be comfortable, and to not have to work a traditional nine to five, and be just stuck at my desk working for someone else. But for me, it's having the time to be a good mom. Culin and I will, in the middle of the afternoon, leave and go to an afterschool soccer match or a lacrosse tournament and we're not flipped out about it.
Some of you out there might be like $3,000. That's amazing! That would cover everything. Others of you might be like, well that's really not that much money. That's the beauty of Airbnb investing. You can have one that does everything you ever want for it, depending on your definition of financial freedom. Or you can build a portfolio that gives you your ultimate financial freedom. And it's different for everyone. And that makes investing different for everyone. But what holds true are these steps for figuring out your where, because, that's the first big roadblock everybody comes to is "I don't even know where to start."
And so we're telling you, this is where you start. You've got to find your where.
And also, if you're not doing this just as a return on an investment play, if you as a Keller Williams, agent are trying to help a client get into a vacation home or a second getaway home, that $3,000 a month is - in addition to paying the mortgage on that getaway place, so that's being paid for! That $3,000 might not make for financial freedom, but it will most likely make a pretty significant dent, if not cover the entire primary mortgage of that client.
So that's a way that you can go back to your clients with some resources for getting involved in short-term rentals. Who doesn't want to buy a second home that pays its mortgage and your primary? That's the stuff dreams are made out of!
I know we all have funnels and we're all looking to maximize the customers we already have. So, if you could go back to your existing clients who already love you and show them how they can have something they've always wanted. Beach House, mountain House, lake House, whatever, that then covers the initial mortgage, you helped them get. You're looking pretty good, and I think you'll get a few referrals out of it as well!
So here's your getting started step. Once you've identified that market, and once you've seen a couple of places that are for sale, reach out. Contact that listing agent. Ask questions, set an appointment. Get out into the market and see what the houses look like, see what the neighborhoods look like.
There's no obligation to do this, but this is the first step. If you can get up outta your home office, outta your car, reach out to an agent. Go see a couple listings. No obligation to buy these, you know this, right? But that's that first step is to get out and go visit the area and start getting a feel for what the market's like, what the neighborhoods are like, what the house conditions are like.
Don't be afraid to tell the agent that you're looking for an Airbnb investment. I learned this the hard way. I fell madly in love with a little cabin on the water, and turns out that that particular neighborhood had some restrictions for short-term rentals. And so anytime I saw Green Acres, which is a dumb name, pop up, I would be like, okay, I'm not even going look at this listing. And the agent we were working with also knew that that was our criteria. So if I would send him something, the first thing he would do is check to make sure that there weren't any regulations and he could keep an eye out because he knows what we're looking for.
It's been a great relationship. He actually sold us two and the last one that's on top of the mountain that we just listed. And it's cool. I think he enjoys seeing the process and he knows that I love them extra crispy - like big projects. And Culin likes some turnkey and so finding us something in the middle that makes us both happy has been his biggest challenge.
So that would be our advice for an action step. Once you've picked out a market, just go see that market, get out the door. Enjoy the fresh air and go see the properties.
So there you have it. Our steps to finding your wear, drilling down into the hard data using Airbnb and Air DNA, which are both free, and knowing before you ever invest how much money your property can cash flow.
Knowledge is power, and in this case, it gives you the power to get over your initial fears and get into Airbnb investing.
If you want to be financially free, then start figuring out your where right now so you can fast track generating cash flow through Airbnb investing. All you have to do is keep listening to the Host Coach podcast and show! Each of our episodes is designed to help you and your clients overcome common obstacles and truly succeed as an Airbnb investor!!