Ep 70: How Short-Term Rentals Can 25x Your Monthly Cashflow… A Side-By-Side Comparison of Long Term Rentals to Short-Term Rentals

I’m sure you know the exact number it would take to deliver financial independence. I call that number the Freedom Number… Freedom from the rat race, freedom of time, freedom to be more present, freedom to take life to the next level.

And utilizing real estate is a tried-and-true method for realizing this freedom.

But if you’ve ever thought about how long it would take to gain financial independence with real estate, this episode is for you.

Today, I compare cash flows from long-term rentals and from short-term rentals and the results are astonishing!

This is by no means a guarantee of results, simply an illustration of some common results.

So, if you know this is the year to move your family toward financial independence and would prefer to perhaps have 4 properties over 100 (Listen to today’s episode as I paint this picture!), then I’ve created a course just for you.

It’s called The 6-Figure Vacation Rental Roadmap: How to Find, Furnish, and Fill a Profitable Short-Term Rental.

So, if this is your year, hop over to ginnytownsend.com/rental to claim your copy of this course today!

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.

EPISODE TRANSCRIPTION

What’s up, Podcast Nation? Ginny Townsend here. Thanks for joining me for another episode today. I want to talk about one of my favorite numbers. And that number is the freedom number. So every person every family every couple has a different and unique Freedom number, but that is the number that were moving towards to be financially independent to be able to retire early.

Were you able to fund a child’s education or whatever the actual goal is the freedom number is, however, like X number of dollars per month in net proceeds and why I think short term rentals, they’re one of the best way to achieve Freedom number in a relatively short amount of time and so a very typical Freedom number would be $10,000 a month, right? Okay.

Let’s talk about typical real estate. Let’s say you’re interested in having a long-term rental. So you buy an investment property you rent it out to long-term tenants and they pay you obviously hopefully if but obviously in my mind more than your mortgage in any other expenses and you net some money each and every month and I’m not necessarily talking about your net worth game in this equation. This is just about monthly cash flow.

So, yes, any tenant will help you increase your net worth by paying down your mortgage for you. But that is a separate like bonus conversation. Yeah, so like I said just cash flow here. That’s what I’m talking about with the freedom number. So if you have a long-term rental, it is not uncommon for people to be happy with or to expect about a hundred to three hundred dollars a month net with a long-term rental and you know, I think it’s like a smart.

And of bread-and-butter stable way to continue to build your net worth to continue to build your assets to continue to build your portfolio and some cash flow. But if you’re looking primarily at your freedom number at your cash flow number, right? I remember the first time I heard this I was listening to a very well-known podcast about real estate investment. And the host of the podcast said he likes to have a minimum of $100 net per month per door, and I just remember thinking

Oh my gosh, all of that like I need to come up with the down payment. I need to figure if like find a lender, you know, because sometimes investment properties have not everyone loves to lend for investment properties. You have to find the right Bank the right Banker, right all of that just to get a hundred dollars a month. So let’s say it’s a very modest home like $100,000 house, right depending on where you live in the country that I would say. That’s a very modest home, right? That’s a 20 to 25 thousand dollar.

Down payment and right. Hold on. I’m going to do list some quick math here. So let’s just say it’s a $20,000 down payment you’re able to find a 20% down loan divide that by a hundred. Oh my gosh. Okay. Yeah clearly 200 months to get your initial Capital back that in case you’re wondering is 16 and a half years. So it would take you 16 and a half years more than half the length of your like a 30-year mortgage to get your initial money.

Back and the cash flow is a hundred dollars a month. So if you had if your freedom number like I mentioned a common one is 10,000 a month at that rate. It would be a hundred rentals. Oh my gosh, so you would have to do that 100 times to be able to get you your freedom number that feels laborious that feels like it will never get here, right that feels impossible, right?

But thankfully long-term rentals is not the only way to build a portfolio to build monthly cash flow and even net worth but like we’re talking cash flow here. There are always short term rentals of which I am a huge fan. So as opposed to long term rentals where it is really good to get a hundred to three hundred dollars a month cash flow short-term rentals on the very low side and once you have it live and you know, you’ve done

Done your research and you know, you have great photos and I’m taking a lot into account here that you know, you’ve done things right on the very low end. You would be getting a thousand dollars a month cash flow a thousand dollars a month cash flow and that is on the low end. So as I have been doing some research research in building our own portfolio and just seeing what what is the market right now? Because obviously we’re in a very unique time in history and things

Are changing right? So I’ve been keeping an eye really closely on different markets and the percentage of booked nights and how much per night. I’ve been I’ve been tracking a lot of things and I still see the potential to make between 2,000 and 5,000 dollars a month cash flow in some areas. That’s right. I said two thousand dollars a month to $5,000 a month cash flow.

Low per property that means one short term rental could be at the very least worth 20 long-term rentals and it could be worth up to 50 long-term rentals. Can I get a what?

So again talking about the actual amount of work to be done. But then also talking about the time and the speed to achieving your goal. If your goal is if your freedom number is ten thousand dollars a month that is with a hundred dollars a month cash flow for long-term rentals 100 rentals needed 100 rentals needed and with short-term rentals and I’m going to kind of split the difference in stay on the conservative side.

At $2,500 a month cash flow. You would need only for short term rentals to reach your freedom number and be out of the Rat Race to be financially independent if your freedom number is 10,000, right which oftentimes it is Financial Freedom with four properties. That is a beautiful picture. That is an absolutely beautiful picture and also going back to the speed at which this goal is possible thinking you have to have a hundred long-term rentals my gosh doesn’t

it just sounds exhausting like it’ll be years years before that is actually possible given coming up with down payments and finding the lending and all of that blah blah blah, but for I mean if someone really hustles that could be done in a year that could be done in under a year but like very realistically a year that is mongers and the first short term rental what you make the cash flow for your first short term rental can help fund your second short term rental, right and then

First in your second could fund your third and then your first second and third could find your fourth and that is how that beautiful snowball happens to be able to get those properties online working for you. And what’s really interesting is the only additional bit of work to exchange your hundred dollars a month cash flow to I mean, it’s going to say 2500 right? I’m going to stick with that level of cash flow for per month. There is only really one step.

In addition that one additional step to getting a short-term rental to be able to collapse your gold 25 times and just need four properties as opposed to 100 properties with both long-term rental in a short-term rental you need to do research on the area, right then with a long-term rental and a short-term rental. You need to figure out the lending long-term rental my short-term rental, you need to actually acquire it right long-term rental and short-term rental. You need to take pictures of it long-term rental and short term until you need to

List it to find people to stay there right long-term rental in a short term until you need to clean it between guests or between tenants. The only thing that sets apart this ability to 25 x your income is one step in setting it up and that is Furnishing that right there Furnishing is the keys to the kingdom Bonkers, right? I don’t know. Why by the way, I’ve started saying Bonkers. I don’t know where it came from.

From I don’t know where I heard it but it is Bonkers that that one step Furnishing can help you 25 x your return on real estate. Oh my gosh. I feel like I just made someone a million dollars and I’m so happy about that. So what would you do if you knew like maybe you began the year 2021 not necessarily thinking. Hey, this is the year that I’m going to become financially independent. Like maybe you decided this is the year that we work towards it, you know, but actually

Achieve it that’s wildly possible in the remaining 11 ish months ten and a half months of this year. That is absolutely possible because with short-term rentals you can do Lisa’s you can do renting you can do Acquisitions, right? There’s there’s all manner of gaining control over the property and to be able to list it whereas you really can’t make much money subletting a property. So you like long term, right whereas

Is there is really just one way to get into long-term rentals, you have to you have to traditionally purchase and then rent out and then hope to make between one and three hundred dollars a month cash flow per property. Yeah, so this past weekend, we had a socially distant dinner with a couple of our neighbors and they shared with us that they are planning to move completely out of state. I would say about a thousand miles away to be able to acquire properties faster to be able

To get out of the Rat Race to achieve their freedom number faster than they would be able to up here in the Northeast and they both have really grueling jobs that are just there 12-hour days. They’re just such Demand on them mentally and physically and they’re experts in their field, but it’s just completely depleting and draining and so I actually asked them what would their freedom number be you know, like if you know, we’re good friends. And so we have these.

Kinds of conversations and to respect their privacy. I’ll just say it was in the mid four figures. So it was less than 10,000 a month and it’s like interesting and I didn’t want to be kind of like, oh my gosh, you should feel have a while like you should look into short-term rentals whatever but I just wanted to like hear their story and how they came to the decision to move out of state. Both of their families are up here in this area. They’d be moving away from family. They had to get recertified in their field in that state.

And it’s a big effort to move across country. But all with the effort to have enough real estate to be able to achieve their freedom number and to be able to quit their jobs and raise their family in the way they want and so I asked her via text the next day, you know saying it’s so great to hang out and asked