Do you know 2021 is your year to add a short-term rental to your income portfolio but you just aren’t ready to buy yet?
Well, if that’s you, this is your episode!
Today, I unpack 3 different strategies for gaining access to properties and listing them on Airbnb or VRBO without buying them.
They are all proven to work, it’s all about which one(s) work best for you!
Do you want to get started in getting your first vacation rental live but don’t know where to start?
Do you want to diversify your income and know real estate is a proven model but feel overwhelmed at the task?
If so, I’ve created a special program just for you: The 6-Figure Vacation Rental Roadmap.
Visit ginnytownsend.com/rental today to get your name on the early-bird waitlist so you’ll be able to gain access to a previously unannounced bonus… My Vacation Rental Labs.
This is where I’ll unpack all that I’m doing as I explore acquiring properties using different strategies such as the ones listed in today’s episode. Thanks again for joining me today. And until next time, continue to be up and to the right.
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/estimate to claim access to this powerful free tool!
Thanks for joining me, and until next time, continue to be up and to the right.
What is up Podcast Nation? Ginny Townsend here. And thanks for joining me for another episode of Uplevel. So let’s get right to it. Right what if you would love to have a short-term rental in your income portfolio, but you aren’t quite ready to buy.
In actually be the owner of the property that you want to put on Airbnb and VRBO. What if maybe you haven’t quite saved up the down payment yet or maybe given the economic conditions. You’re not sure you want to buy it this time regardless of the reason there is always way there is always a way to make whatever you want happen. And that’s what this episode is all about. I’m going to walk through three some are common in one I think is
The lesser-known strategies for being able to control the property. So but you aren’t an owner you’re able to list it and make money, you know receive some of the profits but you aren’t actually the owner of the property. Okay. So let’s dive in with the first one is one that I’m sure you’ve actually heard of if you have done any Research into how to be
Be a an Airbnb hosts or how to be successful Airbnb host. Right and that one is renting and sometimes this is called Airbnb Arbitrage. So you rent from a landlord and then your rent is pretty much your cost of goods, right and then anything you make over and above the rent and utilities and all of the other expenses. Whatever that’s your profit. So, like I said, it’s the most popular strategy that I’m aware of and the biggest Pro in my mind for using this.
D Trent is it is really easy to get in and to scale and because often times when you’re renting a place sometimes the landlord will ask for first and last month’s rent and sometimes the security deposit. So depending on the price of the rent, right? It may be a couple thousand maybe a few thousand dollars, but either way to be able to get access to a property to put it on air B&B that is as
you know, it’s obviously it’s a pretty low cost and the other Pro is like I said, it’s easy to scale. So it’s easy to get in it’s easy to scale. And so if you just have to find a couple thousand dollars to get first and last month’s rent and maybe a security deposit to bring a new property online that is much easier to to do to scale then if you were purchasing a property at a
I’m coming up with that down payment doing the closing process. All of that it there is a little bit of a eu’s towards the scaling. So if you decide obviously like okay, I need three rentals based on how much I think each rental could get in my area. I need three rentals to be financially free. Okay, like that would actually be really easy to do in a handful of months. I would say under six months if you’re really determined and driven.
Using this rental strategy the biggest cons in my mind are well first you’re on the hook for rent payment every month. But like I said rent or mortgage that’s your cost of goods in this business, but you don’t have any Equity to show for it. So with a mortgage obviously your mortgage payment though. A lot of it does go to interest especially early on as your payment will help you pay down your mortgage so you’re gay.
I mean your net worth is growing every time you make a mortgage payment, obviously with rental that does not exist that is just purely an expense. It is a cost of goods kind of a payment now I this is not meant to be a super in-depth all of the tactics and strategies. That’s obviously more for like a course right little bit of a Shameless plug but my biggest tip here
Yeah, because obviously on a podcast I’m just it’s just audio so there’s no resources. I can hand your anything like that. But my biggest tip here is to be up front with a landlord when you discuss your plans because there are Pros for them to but if you aren’t up front with them, they may take offense with that. They may you know, do what they need to do to but cancel your your rental agreement and then you will no longer have control over that property to be.
Airbnb so you’d have to start the whole process over again. So it just makes sense to be upfront and there are Pros for the landlords to for instance guests usually have much less wear and tear than long-term tenants, you know, like so your Air B&B guests won’t paint a guest bedroom purple or something, right? And they typically don’t use the appliances as much so it is you know, and actually I heard
Heard someone say this and I wish I remembered who it was. I would give them credit for it, but they said who like, you know, when they were talking with the landlord because I’ve been talking with other Airbnb hosts a number of them about their Dove use these different approaches. And one of the host said they were in a conversation with the landlord and the landlord said what happens if like the guests totally destroy my place and
The host on me and I wish I could remember who it was there have been so many I’ve been talking with they said well, when was the last time you you know trashed a hotel room right? Like this is pretty much what an Airbnb is it’s nicer than hotel room, but people often times kind of they they have that view right there. Not there. So few and far between is someone going to trash the hotel room right or in this case, obviously your Air B&B so there are Pros for the landlord.
He’s too it’s not like you’re trying to hide from them and then actually based on your estimates of what that property could offer you on Airbnb you may be able to offer more of a monthly rate to them in rent than a long-term tenant. So how would this work? You would do your market research find your area, you know determine what your strategy is find some like some properties go see.
I’m talk with the landlord’s all of that and there are some previous episodes about doing market research and all that. So I’ll link to those in the show notes and then obviously I’m going to reference that. I have an entire roadmap about to be launched called the six-figure vacation rental roadmap that walks you through exactly how to do market research to find the area and then determine your strategy and all of that. Let’s just say let’s just blanket statement do your market research and connect with
landlords to share your plan and one tip I will give you additionally is definitely avoid property managers or Realtors because I well this is what I’ve been told by so many hosts who have done this like just go directly to the decision-maker property managers and Realtors are less comfortable with this it appears but homeowners oftentimes kind of get the benefit of it. So let’s go through an example.
All right. Let’s say you find a cute house in your area. You’ve done the research and it is for rent right now for $1,500 a month. Now giving your research you’ve discovered that this place has a $3,500 a month potential. So you take 3500 – the 1500 runs and your cut is MM – any other expenses you may have and so to be even more competitive. Like I said, you could offer 1600 a month. So it is even more of a
benefit for the landlord and you would then get $1,900 right? Okay or whatever so that is using the rental strategy.
There is a place for this right there’s a place for this but I’m here to tell you these next two ones are my favorites and I think they’re the ones that are less talked about or at least talked about but we’re going to work on changing that aren’t we? So the the second strategy is the co-hosting strategy. It is very similar to the renting strategy, but you don’t sign a lease exactly you approach a landlord and you offer to run the air.
Air B&B in split, the profits oftentimes the landlord will get 60% and you get 40 or maybe even 70 30 when you’re just getting started and then obviously if you have a track record, once you have a track record, you can continue to either increase the rates with new Properties or whatever, but there’s usually a split that favors the landlord for obvious reasons, right and there is no risk for you.
For an ongoing monthly cost. So this strategy actually the cogs are zero, which is really compelling right but there is also no equity either. This is this is a monthly cash flow play. It is not a long-term net worth Builder, but that’s fine as long as you know what it is and you find the property that works for you right now. The landlord may be able to make more money than their long-term rental rate and they’re more likely to
Sir with you in this actually, you know be your Advocate versus just the straight rental approach because they want you to succeed the more you make the more they’ll make right versus. Okay, just make sure you pay the rent every month kind of a thing with just the rental strategy. Now, let’s use that same property example, I used in the rental strategy and see how the costs or how the numbers kind of shake out. So again, it’s a
$100 a month rental the research shows you that that property has a $3,500 a month potential so of that $3,500 potential their cut is 60% which is $2,100 and yours is 40% at $1,400. So instead of a $1,500 a month long term rental, the landlord is getting
$100 a month, so that is I mean that’s an additional $600 a month. They would have never seen But then you’re getting $1,400 a month without the risk of a mortgage or a rental agreement. So it is – your own expenses and however, you all decide to do utilities and things like that. But $1,400 for really no outlay of
Cash on your part isn’t that incredible? So I love that now, let’s again go to the third the third strategy and just to recap the first one is to rent. So you you sign some kind of a rental agreement you cover the rent and then anything above that is yours. The co-host is pretty much like a profit sharing a revenue sharing rather or it’s just a
There is no signing of an agreement to pay a certain amount per month. You simply split the proceeds at a predetermined percentage, right often 60/40 or even 70/30. So this final final strategy is called a lease option and it is a little bit more complicated but I’m extremely drawn to this model. So here is the arrangement of
Lease option you and the owner the landlord agree to a lease of a property for a given amount of time. Sometimes this can be as short as a year and other times it can be as long as five years or even seven years whatever the agreed-upon time frame is that that’s between you and the homeowner, but there is a given timeframe and you will be paying.
At least payment every month during that time, but in addition to this, so that’s the least part. But the option part is you will have the option to buy it at any point in that time for a predetermined price. But the thing is you’re not required to buy it. You can walk away from the ability to purchase it. But if something proves to be a really consistently profitable Place, why wouldn’t you right?
And so there is it’s like a the rental play because you do have a monthly payment that you are committing to your cost of goods, but it could also be a potential Equity play for you. So let’s take a look at some numbers. Let’s say the house that you’re looking at is currently worth $200,000 and you have an option agreement for five years and you commit to okay.
If you know I will buy this house for you in five years at $200,000. So today’s right what it’s worth today. I will agree to buy this from you in five years. Let’s say over those five years the property increases in value to 225 thousand dollars. You can still buy it for 200.
Or like I said, you can walk away an option is an option. It’s a choice, right? You don’t have to but you have the ability to control that property for that amount of time. So again,
you have the monthly cash flow, but you could also earn I’m are quoting or create or choir 25,000 dollars in equity over that term. So the pros are its a relatively little cost relatively low cost to get in now oftentimes these agreements. They don’t have some kind of like true down payment because your
Simply leasing it often times. There is a payment to kind of begin the process which can be a few thousand dollars. But especially if we’re talking about a two hundred thousand dollar property I could imagine that that might be two to six thousand dollars to get in which is not bad, right?
So it’s a relatively low cost to get into the agreement. And then there is the potential Equity play which I think is an enormous Pro because yes it is again. There’s the monthly cash flow play but then there’s the longer term Equity play. All right the cons and I say cons, you know, it’s it’s how you choose to look at it. But you know that’s going to help I’m going to categorize them.
Some cons are some additional paperwork to you know to craft the lease option. It really is rather simple, but it can be some people view paperwork as daunting. I see it as the keys to the kingdom like oftentimes just between you and your goal is some paperwork right between buying your dream home, you know where you are now buying your dream home is paperwork between right now and attending your dream College paperwork, right?
Now and let’s even adopting a child paperwork or starting a business paperwork. I love paperwork because that’s how you get what you want. Right that that’s what takes you to your goal. Right or like a part of it and so a con maybe some people view it may view it as additional paperwork, but then there is also you are committing to a monthly payment during that that term until you either exercise or don’t exercise that option. So let’s
You an example with the same numbers we used for the other two strategies. So again, the the least amount per month is $1,500 your research shows that this property has a $3,500 a month potential. So you’re cut again much like the the rental strategy is $2,000 – any other expenses, but then over the term over the long term over the lease option term.
And given the numbers I told you, you know, you have the agreement to buy you have the option to buy this house for $200,000 in five years and it could be worth 225. It could be worth 250 who knows what will happen in that to five years, but however much it’s worth then you have the agreement. You can buy it at today’s price. So with the numbers I shared with you that would be an additional 25,000 dollars in equity.
Okay. So those are the three strategies that I think are the most viable the most beneficial and for for all parties frankly and I think very realistic for pretty much anyone who wants to get into this. It’s totally possible. Like again said another way simply boiled down if this is something you really want to do there is a way and you know what I am excited to guide you.
As you move towards your first short term rental if I mean if any of these methods sound intriguing or make this goal of owning a vacation rental sound more achievable, I have a roadmap for you and as we get closer and closer to the six-figure vacation rental roadmap going live I want you to know I’ve just added an insane early bird bonus so when you provide your name on the early bird waitlist, you’ll gain access to what I’m calling vacation rental labs and this is like I said, it’s a
Previously unannounced bonus and I will give you the breakdowns of all these different methods as I’ve used them in my own business. So as I work through these as I work through the systems and you know experiment with with new strategies and things like that. I will report back to you in this vacation rental Labs. So you’ll see the questions. I asked the numbers I run and even hear about the conversations I have with the owners. Obviously I
Can’t pre guarantee that the owners Will consent to have the conversations recorded or shared but I can tell you about the conversations, you know, the questions they had the concerns that they had whatever I will share with you as because it’s a lab all of these things that we’re bringing into this business and I think this is a ridiculous additional bonus and I hope that this just makes the whole program a no-brainer.
Owner so go drop your name on the early bird waitlist over at Judy townsend.com to rental to make sure you can get in on this bonus. So thank you again for joining me as I walked through three different alternative strategies for becoming a profitable Airbnb host without actually owning property right now. So until next time continue to be up into the