How to analyze an Airbnb property step by step

0:00 in this video i'm going to be sharing with you how my eight-month-old will become a millionaire by the time he's eight with just one property airbnb investing is one of the fastest ways to achieve financial freedom you can literally become financially free with just one property like seriously so in this video i'm going to share with you exactly how i analyze a property step by step and make sure you watch to the end as every step of analyzing a property is crucial we're talking about hundreds of thousands of dollars and you don't want to make an expensive mistake and at the end of the video i'll show you the numbers on my son's property if you're new to the channel my name is preston and i'm an entrepreneur investor and we own real estate properties 50 plus rental units and we also own three airbnb properties i became a millionaire by the time i was 28 and all the information on this channel is free i literally quit my job to help you become financially free so make sure you're subscribed the first thing i always do when researching markets for airbnb is i like to put my tourist hat on and look at google maps to see which markets i would like to travel to now some of the destinations might not be obvious but some good starting points is looking at towns that have lakes beaches mountains and national parks it can also be helpful to google top places to invest in vacation rentals to get you a starting point so air dna has an article that has the best place to invest in vacation rental so let's use this okay so i don't like to look at u.s large markets let's go to u.s medium here carolina new york connecticut

1:17 okay past christian mississippi might be an interesting one i know that's on the gulf so let's actually use this as our example for this video now i wouldn't blindly just invest in these just because they're on the list but it's a good exercise to research different areas and it really doesn't matter where you live i live in utah and have properties in arizona and florida so location really doesn't matter but if you want to invest in your backyard that's totally fine as well and i personally like to go to markets that give me the best return and again for me personally i weed out the big cities like la miami and new york because generally speaking those areas are not only super expensive but they also typically have higher restrictions when it comes to short-term rentals in pro tip before you dive into any market make sure that they allow short-term rentals it's as simple as googling the city you want to invest in short-term rental laws and before we go any further i want to make sure that past christian actually allows short-term rentals so let's google that so when i googled it it came up with this ordinance here and let's take a look to see if this actually allows short-term rentals okay so it looks like they do allow it but there's a permit required so that's good news so yeah let's continue to use this example here and if you can't find any short-term rental laws by googling it it's always good to double check with the city by calling them if you're concerned at all all right so once you have a market narrowed down it's time to see the inventory of what's currently available okay so we're over at realtor.com and this is my favorite site to look for

2:34 houses and you can use any site like zillow redfin etc i just personally like realtor.com so as we go in here let's type in pass christian mississippi and then i always like to filter it down a little bit so let's actually do two plus bedrooms and we want to hide any of the ones that are under contract i personally filter out by hoa i know there are people killing it within a joys but the risk you're taking is that they can shut down your entire operation overnight i've literally seen horror stories of neighborhoods getting too saturated with airbnbs and the committees will vote to get them out i'd rather not deal with the headache of if and when it'll happen so i just avoid them all together so let's do no hoas so yeah we have 23 homes that are in this range here so let's just take a look and this is important to mention and as you go through these properties there's usually two ways you can go about this the first way is going turnkey where there's minimal work to be done but things you need to remember is that there will be way more competition if you go this route and your equity upside is limited and the second way is you can look for a property that needs some work which is what we've done on most of our properties there's less competition but you typically have to put more money up front and deal with contractors it's entirely depend on how you want to go about this but for this example let's just take a look to see what's out there let's go down here and i like to look for a larger property so anything that's

3:52 3-2 or 4-2 um let's take a look at this one just kind of take a look to see okay this is actually a really cool property it's got the pool it's got it's pretty nice 650 000 is not a bad price so so let's actually use this as an example so my investing style especially at this point is i tend to go for larger properties the reason behind this is it takes the same amount of effort to set up a smaller airbnb as it does a bigger property plus generally speaking bigger properties have potential for higher revenue i like to use air dna to hone in on what i can expect to earn on a specific property i'm not sponsored or affiliated with them they just have lots of great data you can pull from it is a paid subscription but it's about 100 a month for larger cities and 40 per month for smaller cities what i typically do is use it while i'm making offers on properties and then cancel it when i'm not doing any more research and again you're talking about a big investment here so spending a few hundred bucks to not make an expensive mistake is well worth the price all right so let's plug in the address here so this was a one two three four bedroom and there's a three bathroom and so this could easily sleep up to 12 guests so let's update that and see what it comes out with so we're looking at 643 000 as your annual revenue and 329 for your average daily rate and we're looking at a potentially 54

5:09 occupancy so what i found is air dna is usually typically conservative with their numbers so we can actually validate this with airbnb here in a second so this is this rentalizer is completely free so if you actually want to go through and go through overviews the occupancy rates these are all paid services that you can buy um it's actually really well worth the price i just don't have it unlocked here because i haven't paid for it but the pricing tool is free so that's always a good place to start but if you want to drill in deeper definitely make sure that you get the subscription all right so we're here on airbnb.com and let's go to past christian mississippi and just put on flexible i like to put it out a few weeks here and then for guests let's just put six here for now so obviously we have a huge range here so we want to drill in to be a little bit more specific so our example before was a four bed three bathroom configuration so let's actually look in here entire place and we can actually filter by the amount of bedrooms so four bed three bath and this will give us a good comp for our property and what you notice is that lots of people don't have dynamic pricing on which is something that we can go into in a different video but and this is a huge advantage that you can have as an airbnb host is by even having the dynamic pricing it'll go a long way

6:26 to increase your revenue so let's take a look to see what the competition looks like um as we scroll down here okay so this cozy waterfront home in the past might be a potential good one here to use okay so i mean the listing looks really clean but they didn't use professional photography which is a huge downside let's take a look okay yeah i mean this one looks like a good enough comp here for our purposes for this video let's actually take a look to see if their prices change uh doesn't look like they change but let's see if we increase the guess see if that changes anything let's just use this as a comp 300 a night air dna said it was going to be about 54 occupancy at 329 so let's use this as an example and plug into the spreadsheet so this is a spreadsheet that i use to analyze all my properties um so let's plug in the purchase price 650 000 here and pro tip you can use a 10 down vacation home if you're there at least 14 days throughout the year so interest rates are a little bit higher now so let's be conservative and call that not 500 it's called a 5 and then okay as you come down here the cost per bedroom so this actually pulls into here and so we have a four bedroom three bath so that's good and the common spaces

7:42 um i'm looking at the property here right now i think there's only a couple so let's just put two there for now so yeah so it's going to be roughly about 30 000 that sounds about right for this big of a house it's about 2500 square feet and then repairs i mean there really wasn't that many repairs so let's just leave it at 12 000. so your initial investments can be 130 000 so they come over here and air dna when we went back it was about 329 as the average daily rate so let's just leave it at 300 to be conservative and average occupancy they're calling it 55 so all these expenses you want to make sure that you hone in but to get a good starting point you know i would be conservative with your numbers again i always make sure to set aside repairs and maintenance and we're going to manage the property ourselves so i left that one out so as you come down here this is really where you want to look is the cash on cash return here and we're looking at five percent and so to put that in perspective i like to get anywhere from 12 to 15 of my long-term rentals and now for short-term rentals i like to get anywhere from 30 and higher so as you can see the 5 return is pretty awful but again not all these properties that you analyze are going to be winners so this looked like it was going to be a good deal on paper but as you drill into

9:00 these numbers as you can see that this return is not good enough for you to investigate further that's why it's super important to know your numbers because you don't want to make an expensive mistake and if you want access to all our investment calculators we're doing a limited time bundle deal we personally use this in our business and it includes the long-term rentals this short-term rental spreadsheet flipping wholesaling bur it includes it all and it's the most comprehensive bundle that i've seen anywhere so if you want to check it out link is in the description now as promised let's dig into the numbers on my son's property so here's some pictures of my son's property and as you can see we bought a pretty turnkey which i was super happy about and actually appraised sixty thousand dollars over what we got it for we'll dig into the numbers here we're doing some minor repairs to it but let's actually go in and dig into the numbers now all right so here are the numbers for my son's property so we bought it for 835 000 we put 15 down as a down payment at a five percent interest rate estimating the furniture budget we overestimated here it's actually a three bedroom but we put five bedrooms so our initial investment just gonna be over two hundred and five thousand dollars being conservative so these are really conservative numbers for the average daily rate and also the occupancy rate and so as you can see here after all expenses and this goes for everything that i've listed here we're looking at a 44 cash on cash return and again we typically look for

10:19 anywhere above 30 percent so 44 is a killer number and so our net cash flow each month is just gonna be over 7 500 bucks a month for my son and if you go in this tab over here these are the projected tenure numbers and so it's always good to take a look to see how your investment is going to perform throughout the years so after we're all done honestly this property is going to price for more but i just left it at a conservative 875 000 so i told you that my son's gonna be a millionaire by the time he's eight years old so let's take a look to see how so looking at the cashflow alone in eight years he's gonna have accumulated just under six hundred thousand dollars in cash flow and as we look here at the appreciation and i left it here at a conservative three percent each year but it's likely gonna be higher than that and as you can see here he's gonna have just under five hundred thousand dollars in equity and just appreciation alone and this doesn't account for any of the tax savings either so on the cash flow and the appreciation alone he'll have accumulated over a million dollars by the time he's eight years old if we take a look to see what total return on investment is in year eight we're looking at 83 percent so that's a crazy high number and this is just off one property as you look here on the very right you can take a look to see exactly what you're looking at after 10 years i mean you're looking at a total return on initial investment of 636 which is just nuts as you can see airbnb investing is

11:36 one of the fastest ways to achieve financial freedom you can literally retire off one property if you find the right one the most important thing before you invest is to make sure you run the numbers correctly to get the most accurate representation of what you can expect as you saw in the analysis of our first property initially it looked like it could be a great investment but as we dug into the numbers you saw that it was actually a dud of a deal and again if you're serious about real estate investing we are doing a bundle deal on all our analysis calculators link in the description to check it out i quit my job to help you become financially free and that's always been the goal for this channel is to help you achieve financial freedom so make sure you subscribe so you don't miss any of our new videos and if this video is helpful please give it a like thanks and we'll see you next time