It can take some research, planning, and strategy to make the decision of becoming an Airbnb host… especially if you’re looking to invest in a property solely for short-term rental purposes.
As you’re thinking through whether this kind of a revenue stream could be right for you, it’s important to do what you can to mitigate risks and think about what you can do to maximize the upside.
That’s what this episode is all about…
Today, I’m sharing a couple of my favorite ways to tackle this process.
And if you’re curious about how much you could potentially earn with an Airbnb in your area, I can send you a free and pretty powerful tool to help you estimate…
Visit GinnyTownsend.com/rental to claim access to this powerful free tool!
What’s up, Podcast Nation! Ginny Townsend here, and I’m excited to come to you with another episode. It may sound different on this podcast because I just went to go pick up some flooring for a new Airbnb. We are about to bring it online. Hopefully by the end of next month, which is so exciting. And the flooring is gorgeous. It was exactly what I was hoping it would be
You know when you’re choosing from like a small sample, you know, anyway big decisions, right? So quick shout out by the way to Tile Liquidators out in Folsom, California. They have the best customer service and totally helped me find the best deal on the look that I wanted and on the product that I wanted. So shout out to them. Okay, last episode if you have been following along this adventure.
Of trying to decide hey is having an Airbnb as another Revenue stream your next step towards financial and time freedom and help kind of way out all of the pros and cons and all of the different strategies and investment types. And you know, there’s there are so many different ways to approach this type of revenue stream. I’ve been thinking through. Okay, what would have been most helpful?
If I had started this actually with some strategy in mind because as you may have heard in a previous episode, we became accidental Airbnb hosts. So it wasn’t a huge amount of strategy that went into our initial decision making but since then there has been a lot of strategies.
So I was thinking what would I have loved to have known or thought through and on the last episode I mentioned that I would be talking about a couple of different ways to both mitigate risk, but then also to be able to look for and to be able to capitalize on any additional upside and I think between the two mitigating risks is far and away the most important thing as you think about ensuring in if you choose to enter in to having to begin Airbnb host or short-term vacation rental host and
I know that I’m not on my own and that belief that like really famous investors like Warren Buffett and Ray. Dalio. They’re all about mitigating the downside. How do you protect against loss? Yes, they want to grow their wealth. They want their money to make money, but more importantly, they focus on how do we mitigate any risk before we make an investment? And so I feel like if it were
Program if it’s good enough for them. It’s a great first perspective to have when considering whether to be an Airbnb host or what kind of Airbnb host you would like to be and so I think that there are a couple of very practical ways to mitigate any risk on this potential new venture.
And one of them is to try it out with something you already have access to whether that be listing a room in your place, you know. Yeah, so if you have like an extra bedroom in your home apartment condo cabin, whatever or actually I think what would be really telling and eye-opening would be to rent out your
Her place now at first okay hear me out. This would be a test. So this isn’t I’m not asking you to move out of your house and rent it out on Airbnb. What I’m saying is what if you were to list your entire place on Air B&B and go through the process of being a host talking with people answering questions, whatever seeing how much you could actually make actually being able to do.
Deposit that money into your account and then if and when your place gets booked, then you actually utilize a little bit of geographic Arbitrage and rent a place on Airbnb for you and your family to stay in obviously. This would be a lot easier if you didn’t have young kids whatever but I actually think it’s a pretty Grand Adventure. So I think yeah and then actually seeing hey do I even enjoy this process? Did I enjoy the process?
Of creating a listing and taking the photos and thinking about okay. What what would I need to do to set up an Airbnb like having the Wi-Fi codes ready? I mean if nothing else have the Wi-Fi codes ready and toilet paper right and clean bedding and all of that but you know, there are a couple of things Logistics that oftentimes once you get set up there in place, but it’ll give you a great sense of what it’s like to actually be a host.
Without having to really invest anything. I mean if you’re going to be renting out a room and extra room in your house that maybe you would use as storage. Okay? Yeah, like the cost of putting it together as a bedroom that I’ve out feels rather minimal and you could definitely recoup the costs. Even if you don’t want it to be a long-term play you can keep renting it out until you have recouped the cost and that feels like a very low-risk test right even renting.
Your entire house, I think is it pretty low-risk test because you can either break-even or even make money on it if you’re able to stay somewhere for Less while you have guests in your own home.
Okay, so that’s just a test run to see. All right, let’s get past the gate of like is this even fun? Is this something that I want to pursue as a more meaningful Revenue stream in our family? Okay, so that’s yeah that’s mitigating one risk because some people don’t like it some people hate it and it’s great to know that before you’ve really invested any meaningful time or resources.
Windshield wipers going. Yeah, it’s a little rainy. It’s a little rainy right now, but I still in case you’re wondering I am on a very uncrowded Road and I do feel very safe talking while I am in the car. So, okay. So that’s one risk that I think is is easy to mitigate will I even liked it and then another risk is
Okay. So let’s say you decide you want to go ahead and purchase a property with the intention of it being a short term rental now, obviously, that does come with some outlay of cash and time to actually buy the property and furnish it right, but I think that there are still ways to mitigate the risk of many purchase you may make
Simply by taking a look at Exit strategies. So it’s something that my husband and I have learned about Investments is thinking about you know, and we’ve learned from experience from things that didn’t work out as wonderfully as we’d wanted them to but thinking about what is the exit. What is the plan for the investment? Is it the ability to sell it is it what what is the plan?
And so I think if you are planning to purchase property with the intention of having like, I said a short-term rental furnished rental like a new baby.
In my mind, there are a couple of different exit strategies that if the numbers work if it all pencils, it mitigates risk and one of those is okay. Let’s say either you didn’t like actually being an Airbnb host or some local law or whatever changed and you are no longer able to do to be an Airbnb host which has happened to people.
Granted in more urban areas, to be honest, but it has happened. Could you rent out that place unfurnished? So for a longer-term just more of like the kind of like a bread and butter basic rental if you couldn’t have it as an Airbnb. So yeah, maybe the ROI won’t be as high. But could you at least break even in my mind? I would want a little bit more of a cushion than just break even in this scenario, but
take a look at just like the basic bread and butter long-term rental rates in the area. Could you cover the cost of your mortgage and or you know insurance and any other expenses that would need to be included?
Bye-bye. Someone just renting out the place long-term my mind that gives such freedom and flexibility to for you to decide what you would like to do with the place longer-term. So if I mean depending who knows what the real estate market is going to do over the next couple of years. I mean we’ve where we are at we read a little bit more rural.
We’ve seen a huge buying boom this year because people are looking to get out of larger cities, but eventually, that bun will slow and I mean, yeah, who knows how prices will shift right like this is it’s an unprecedented market right but having income but at least covers the costs of your mortgage and any other expenses, like I said would give you the flexibility to ride out whatever, you know Market may come and give you the ability to sell when it’s in an up Market again, and yeah, so really if you have someone covering your costs if you’re even making a little bit of money, it’s essentially it doesn’t a hundred percent matter what the market is doing right? I mean, yeah, it does but it doesn’t it’s not dire if you can have all of your costs covered.
So that is that’s another way to be able to mitigate the risk of actually hosting a property to be an Airbnb property and every me place you’d like to rent out and finally, I mean, yeah, even if you aren’t planning to necessarily sell it taking a look at how long properties in that area go for before they’re actually sold like how much time do they spend on the market? I think is something great to know before purchasing.
Property for Airbnb now, like I said unprecedented Market, you can’t necessarily take like what is it called a past performance does not guarantee future results, right? But it gives you a sense of like if it takes if a house is usually sold within two or three months in an area. It’s like, okay, okay, but if the houses take longer to sell or if it’s a more unique property, that’s something to take into consideration that it might take you a little bit longer to exit too.
Well, if that was indeed the choice that you had to make so making sure that you’ve done your research that you’ve done your due diligence and the numbers make sense this scenario you’re comfortable with the I feel like in those scenarios that mitigates so much risk in my mind. So then I’m free to go for the most profitable in my mind.
And most profitable use of that property would be short-term rentals because yeah like I mean short term rentals if you’re renting something for like $189 and night something like that a hundred and $99 and night that’s $6,000 a month. If you have it booked out a hundred percent, right? I know I know but let’s just say like the opportunity or the capacity to make six thousand dollars a month. Is there whereas
Maybe a rental in your area like a long-term rental might be mm. Okay, so alright so now but if you have mitigated the risk and it all still you still feel comfortable with it. It’s within your level of risk that yeah, but you feel comfortable with didn’t feel free to pursue the most profitable like the highest and best use of that property. Right? And so those are a couple of points to consider if you’re looking to
Gate, which I absolutely think is so much more important to think about. What could we do? What kind of positions could we take in two? Yeah, just to make sure that we don’t actually lose money with this investment, and then it becomes so much more fun. You are so much more freed up to think about the upside and making sure you can capitalize on the upside.
And now that is I also love talking about this but it is so locale dependent on what you can actually do to capture more of the upside. So there are things like definitely pay attention to what type of traveler comes to your area and books a place similar to yours. So whether it’s a house a condo apartment, whatever our cabin what is the typical traveler like and what do they want? Obviously, if you furnish it to fit that type of avatar
if you capture it in photos and then the descriptions you mention like okay are great coffee houses important to my avatar. All right mention the one that’s a half-mile down the road, you know that it’s local and it’s amazing and whatever but keep in mind who your avatar is and speak their language both actually in words, but also in photos and amenities and then take into consideration the seasonality of where your listing is. So if for instance we
In the Northeast and fall here is gorgeous. And as I was looking at monitoring prices of Airbnb’s my area. I saw that there was a little bit of surge even in the age of covid for the month of October and it’s because this place just becomes it’s like Nature’s fireworks. It’s stunning. Yeah, people want to come to the area to see the fall.
All leaves all among other things but right but thinking about seasonality. When could you raise your price just a little bit to capitalize on why people are traveling to your area, to begin with or if there are festivals or events back when we like when we get back to doing events and festivals and stuff think about that and also you can even note in your
Always having photos of events or like in my area. There’s some a lot of apple picking and things like that in the fall having photos and fat. I think it just it it speaks the language of who is looking to book at your area. And in that season so definitely making sure like I said, there’s The Travelers Avatar who’s coming then also the seasonality of whatever maybe summer is like
You live in a beautiful place where summer is like, yes, people visit there for the summer people go there in the spring or maybe it’s like a we place and people go there in the winter. But whatever your kind of anchoring season is make sure to spend a lot of time kind of like taking great photos of that key season, but then also take a look at the other listings in your area because you know, especially if they have a lot of reviews
They’ve been around for a little bit. They have figured out some things that work. So you don’t have to reinvent the wheel which is something I love again about this business model is you can actually see what’s working. You can look at other people say like okay this you know, this listing has oh my gosh, it has you know, like 400 reviews. Holy cow, and then you can look at their calendar and see that it’s pretty well booked out. Okay, you know that they’re doing something right take a cue from them.
And I will actually continue to be doing some more specific strategies showing some specific strategies to help you take advantage of capitalizing on the upside. But for now, I feel like those are really the 80/20 like the big things as far as mitigating risk the big things as far as knowing who is going to travel who’s going to be actually paying.
And designing the experience and the place around them and the seasonality that people are willing to pay more money to come to visit and I think you’ll be off to the races. So from here. I hope that you are starting to think about hey, could we test out having an Airbnb listing by either renting out a room of our space or do you want to do a little bit of geographic Arbitrage and
place your entire home on Airbnb and then just go somewhere else while you have guests there to see the experience and then take a look at okay if you’re going to move forward with investing take a look at the rates the rental rate. So if you had to move for a long-term position from an investment strategy, what are the long-term rates in the area that you can command and take a look at the cycle of the sale cycle of how
houses in that area. So I hope you have you know, I hope you take action on doing this research and please let me know. If you do I would love damn from you or tag me in your stories on Instagram. My handle is it’s Ginny Townsend and I can’t wait to hear what you think and how you’ve acted. So until next time continue to be up into the right.