How to find a cash flowing Airbnb arbitrage property, step by step

0:00 so we're making $5,000 a month in cash flow from every property we launch on Airbnb in the last 2 years and today I want to teach you step by step on how to find a property to launch on Airbnb but before we get started I want to introduce myself my name is Preston I've bought over 40 rental properties worth $1.5 million in the past few years and have multiple airbnbs across the country and I've helped hundreds of people find a property launch it on Airbnb and make on average $2,500 a month in profit without having to own the property using the airb VR rech charge method and in this video we're going to cover number one how to find the perfect Market number two how to make your property Stand Out by using furniture and different amenities and number three we're going to analyze a couple of real life good examples and also bad deals after doing the above now the reality is 99% of Airbnb hosts struggle to make money and that's because they lack these proper fundamentals on one makes a good property and one makes a good deal in today's market now first let me explain what the business model of Airbnb archar is to make $2,500 a month in cash flow from one property without having to own it and the best thing about this model is you don't have to go out and get hundreds of thousands of dollars in debt you don't even need to have a real estate license so when it comes to Airbnb Arbitrage you have three parties involved number one you have Airbnb here and then you have you who is AKA The arbitrager and number three is a landlord so let's say a landlord has a property listed for R for $2,000 a month so you and the landlord agree on a subas addendum so you list on Airbnb and now

1:17 let's say a guest find your property and they're paying you $5,000 a month so Airbnb is going to pay you minus like a 3% fee and then so you will get roughly let's call it $4,800 a month you have to pay the landlord you also have to pay some other expenses so from there you pay the landlord their rent minus let's call it $1,000 in expenses so after all expenses you're left here with about $1,800 to $2,000 a month cash flow now you might be confused and have more questions so let me explain further so you have a better idea of how this all works there are over 20 million units listed for rent and the people owning these properties or in other words landlords fall into one of these 10 categories and the type of landlords we want to focus on for airb arbitr is the mom and pop investors because these are the people that own a couple of properties here and there they might have inherited the home or transitioned a former residents into a rental so these are the type of llor that don't want to do real estate investing for a living so what they're looking for is number one spend as little time as possible on their property and number two make passive income every single month so now you as the arbitrager are going to come along and you're going to tell them hey you know love your property for rent uh what I can do is take this property off your hands give you free property management plus pay you $100 every single month on top of rent so you're going to get passive

2:33 income and then I'm going to run your property as a short-term rental and then we can both have a win-win scenario here win win win and they're going to sign a 2-year sub leas contract where they allow you to essentially manage their property and become a second landlord without having to buy the property and if you're thinking to yourself that there's no way a landlord's going to allow you to do that but as a landlord myself if someone came up to me offered me a 2-year contract where they pay me rent every single month plus a couple hundred bucks of Straight Cash Flow then I would absolutely say say yes to this or maybe have another concern like why can't the landlord just do it themselves and for the people asking this let me counter by asking you why do you have a job BR so your boss can clearly do your job themselves but they hired you right so that's because they either don't have the time or they rather focus on more strategic activities and the same goes for managing other people's properties as on Airbnb because there's a lot of landlords out there who would gladly accept this you just have to go out and find them and if you want me to make another video on how to find landlords and drop a comment below so now airb comes into into the picture where you take the prop proper you signed and then you launch it on airbnb's platform but in order to make $2,500 a month or more in cash flow from the Airbnb you just launched you number one have to have the proper Mark research and number two you need to know how to make a stand out on Airbnb and by the end of this video you're going to know exactly how to do that so the easiest way to find a market that has potential for Airbnb Arbitrage

3:51 is to ask yourself where do me my friends like to go on vacation and also what do they experience there and also what's worth remembering from that state and don't worry if you can't think of anything anything off the top of your head I'm also going to give you some other ways to find market so another way you can go and search for properties is by Googling best US cities to visit in 2023 I also like to use the AI tool Google bard now I personally like to stay away from big cities like La New York San Francisco and so on and mainly because these markets have really strict laws when it comes to airbnbs what you want to look for is smaller Family Getaway cities or tourism attractions nearby which states are more air beamy friendly and that also gives you more flexibility or you can even find smaller cities that are closer some of these bigger cities that allow airbnbs so in fact me and my team have made a report of a thousand cities and their state laws and if they approve airbnbs or not so if you want that you can click the link in the description it's absolutely free to get so here's a check list that you can follow to find a good city and market for airbnbs the first thing that I look for are regulations so I want a city or a market where they've already made up their mind on airbnbs and also a place that doesn't have crazy restrictions another thing I like to look for is the demand and I want to see it continue to rise number three you have to also consider the competition and you want to make sure that you can go in there and stand out from the rest of the crowd and

5:08 the fourth thing that you want to look for is that the numbers make sense more specifically I like to follow the 2.25x rule so this 2.25x rule basically means that the revenue every single month needs to be 2.25x the monthly rent so for example let's say you found a property for rent for $1,000 a month that needs to be 2.25x for the monthly Revenue so the revenue I want to see is at least $2,250 per month and if this is the case then generally speaking this property will cash flow so once you find a good Market you also want to start looking at the tourism stats so you can literally Google your Market tourism stats or you can even find this information on Google bard and this is just a good idea to gauge to see how much tourism comes into that specific market and this isn't a hard rule of thumb but I personally like to look for markets that have at least 500,000 visitors every single year so once you find a solid Market that meets these criteria now you want to start looking for individual properties within those markets so now you're going to use a website called airdna to start deep diving into the data and also the numbers to see if our properties can actually generate some cash flow now let's talk about how to make your property stand out so obviously you can't launch the property as is on Airbnb or you're not going to get as many bookings as you were hoping for now you're going to have to start adding different Furniture amenities a cohesive design so that people that come and travel to that market will actually want to book your property so obviously we're

6:25 going to have a budget to allocate to these three main pillars so the first pillar that we're going to look at are amenities right and so amenities are things like know ping pong tables a hot tub grills pool table Etc you can also look up on Airbnb and also air DNA to see what your competitors are using for their amenities and their properties and some really good B for your buck amenities that I think every single listing should have are string lights in the backyard fire pits and also yard games also if your target market or families traveling together then you should also have pack and plays toys for them Etc now the second pillar that you're going to have to to allocate is Furniture you can go on sites like Ikea and Target you want to start looking for things that have good reviews but that aren't super expensive I personally like to spend a little bit more on front so that you don't have to keep replace them over and over again trust me especially when it comes to mattresses and also other big ticket items like couches tables Etc now the third main pillar that you have to focus on is the design so you can go on Pinterest or even a sight interior Ai and come up with a cohesive design for your property to make it stand out so for example since our property near the Ohio State University maybe we want to look at an Ohio State themed property like having cool wallpaper and also having accent walls so then the actual airb be listing before you're going to launch the property play around with the name the photos and also the description and

7:42 we're living in a cool day and age where we can use AI tools like chat gbt to write all this stuff for us I also like to create a brand for each one of our properties to make it more memorable for our guests that are staying now because this property near the Ohio State University let's call ours the brilliant Buckeye I know this is a world class name so this is really just going to give our property a personality and also like I said The Branding is important because this is also going to attract guests from being repeat guests in the future so these are all things that a lot of Airbnb hosts aren't thinking about so if you can do these things up front then this is going to make it way easier for you to stand out and also for you to get repeat guests in the future so now let's take a look at good and bad airb Arbitrage deals after we run all the numbers all right so I'm over here on airdna and I switched over to my computer to give you a better idea and a real life example of how this all works so for example let's go over to Columbus Ohio for this example now I've chosen Columbus Ohio because number one it has really strong tourism there's over 39 million visitors in 2022 it's also near the Franklin Park Conservatory there's different botanical gardens club of zoo aquarium and also the Ohio State University it's also a major business Hub with a lot of Fortune 500 companies that are headquartered in the city this also makes it a popular destination for business Travelers there's also a bunch of different events that go on throughout the year like the Arnold sports festival the Columbus marathon the Ohio State say fair Etc so that

9:00 being said there's about 3,700 active listings here in Columbus now most people make the mistake of looking at the annual revenue and the oit rate for the entire Market but what I want to focus on to determine if this is a good Market or not is take a look to see at individual properties within this Market that I'm trying to go after so an easy way that I do this is I like to go over here to the filters I'm going to filter let's say we're only looking for three plus bedrooms we're going to hit apply and now we're going to head over to the active listings and then I want to filter by Revenue to see what the top performing properties are looking like so as they say if it's not broken then don't fix it right so you want to start looking through these top performing properties see what amenities they have the type of design they have and also where their location is so I want to take a couple of these top performing properties and keep track of them and then once I go to zilla.com for rent I know what type of properties I'm looking for so I'm over here on zillow.com for rent now couple things to keep in mind you want to obviously filter to for rent now if you have a certain budget you want to stay in between then you want to make sure that you have a minimum or a maximum budget so in this example I want to go after four plus bedroom properties and then once you have all your filters set you want to start scrolling through these properties and look for properties that stand out to you and have a potential winning unique angle so first let's take it a look to see what a bad deal looks like okay so the reason why I told you to take emotions out of this because when you first look at this property the curve repal looks really great the inside has been finished

10:17 really nicely and the monthly rent seems pretty reasonable so let's copy this address and then let's head over to a name so we're going to copy and paste this address into a name and then we're going to update so the revenue projections are saying 25,000 per year but again I want to go to the very bottom and I want to take a look at individual comps to see what this property can actually generate so I'm going to start looking through these properties here so let's say that you know this property looks like it can be pretty comparable here I want to look through these photos to confirm and you know again our property might be a little bit nicer but you know for the most part our property does look pretty similar to this one so now we're going to plug in the average daily rates along with the occupancy rate which is about $29,000 let be a little bit conservative let's call it 72% which is about $27,000 per year so now we're going to going to put in the monthly rent expenses because this property is a little bit smaller we're going to put about $850 in utilities now after all expenses have been paid if we were to get this property we'd be looking at a negative 119% cash on cash return or we'd be losing $1,100 every single month if you went with this property even if a property looks good like this property here that's why it's incredibly important to run all the numbers now let's take the look to see what a good deal looks like so in this example because we're near the Ohio State University maybe you want to start looking for property near the university right and make it walkable again the main thing that we want to look for is a property that stands out that has a

11:34 really good location or a place that's unique like having a pool um or also having a big backyard that we can utilize to have games and also make it a more memorable experience for these guests that are going to be staying there so I found this cool property that fits the criteria so what I want to do is I want to take the address and then head over to airdna to see what the projected Revenue number is look like so I'm going to copy this address and then I'm going to head over to airdna so once you go to airdna you want to click on the property earning potential copy and paste the address and then we'll see what the numbers look like so now we want to make sure that we filter it was a five-bedroom two bath place and for that size of our property we can probably fit 15 guests now the revenue projections are saying $153,000 per year and again a quick easy tip to see if a property is going a cash flow or not is to use a 2.25x rule so again it has to be 2.25x the monthly rent in projected Revenue every single month so a quick example if the rent is $2,000 a month then the monthly projected Revenue needs to be at least $44,500 a month regardless of the occupancy rate and another tip I like to use is if the property has been vacant for a while then the landlord's literally burning money every single month so they're going to be more motivated and be more open to your airb Arbitrage pitch so start going through these properties add them into a spreadsheet and then once you have at least 30 to 50 of these then you're going to start reaching out through these landlords so now we're going to run the numbers on this property so one of the biggest mistakes that people make is that they take this Revenue projection number and they say

12:52 oh great this is what my property is going to generate plug that into some sort of calculator and then that's what they go based off of but what we want to do is look at the individual comparables at the bottom of the screen here now as you can see there's a wide range of properties and also the revenue projections for each property so we want to make sure that we find the most comparable property or properties to compare our property to so for example let's take a look at this property so as I scroll through these pictures here it definitely looks like our property can definitely if we add the right design and the furniture and amenities that we can definitely compete with a property like this now the revenue that they're bringing in is about $116,000 per year so we're going to take this number and then we're going to head over to my airb Arbitrage calculator so we're going to do real quick is run through these numbers okay so the startup cost monthly rent security deposit other fees like your LLC setup and then the estimated cost for the bedroom so a total initial investment because this property is a little bigger we're looking at just under $155,000 for the initial setup now we want to start plugging in all the numbers okay so obviously we have to enter what the average nightly rate and also the average occupancy rate is so that property that we looked at it can generate about $106,000 per year now let's be a little bit conservative we're going to call it $114,000 per year for our property now we're going to plug in all the expenses like the monthly rent Insurance also the utilities cable internet and different pricing management software Etc now after running all the numbers including all the expenses we're looking at a cash on cash return of

14:09 253 so to put that into context if you don't know what this number means the cash on cash return is the amount of cash you're getting back from the amount of cash that you put in right so I personally like to look for a minimum of 200% cash on cash returns and also to put into context I like to get anywhere from an 8 to 10% cash on cash return for my long-term rentals so for airb Arbitrage your money goes way further which is why I'm a huge proponent of this business model and for our cash flow we're looking at over $3,100 a month and again that's after all expenses have been paid so there you go that's pretty much all you need to do from doing market research and also checking to see that all the numbers are going to make sense for your property now another important thing I want you to focus on is to not get emotionally attached to a property that you've chosen and always make sure that you run the numbers and if you want to learn more about this entire process I like to call the Bridge method and it's a method that me and my team created to beat 99% of Airbnb hosts with our properties I have a free life training that I'm going to be hosting soon where I'm going to show you exactly how we do it we're going to go deeper into specific markets how to pitch landlords and also give you my Sal scripts that we use and also my furniture suppliers that you can use to get a huge discount on the furniture that you buy you can click the link in the description to register it's absolutely free to join just make sure that you join on time as I've run these trainings and yes it's completely live it's not some pre-recorded training if

15:26 you want more videos like this make sure that you're subscribe hit the notification Bell like this video and I'll see you in the next video