How to invest in 2023? I'm at a dead end.

[Brandon Patrick]

Hello All,

I'm the owner of 3 Airbnb properties that I've acquired and renovated over the past 6 years. Initially it has been great, so great it has prompted me to leave my aerospace career in Jan 2022 to focus on real estate and remodeling. However, like many others, I've noticed the recent economic challenges impacting Airbnb hosts. In an effort to stay ahead I've tried renovating one of my properties since it's easier for me being a remodel contractor. While the process of fully renovating one of my properties was exciting, the outcome didn't match my anticipated returns. Although I was able to increase the nightly rates, the issue lies in the reduced number of booked dates compared to my similar non renovated listings. It appears that guests are more inclined towards a good deal than a nice home. This realization has led me to reevaluate my approach and seek strategies to strike a balance between attracting guests and maintaining a competitive edge in the market. What's confusing is the continuous increase in new Airbnb listings, even in states like Arizona, which ranks second in the US for Airbnb crashes.

After seven years in the Marine Corps waiting for rates to drop is not my style. Instead of sitting around I've ventured into property flipping to save up funds for when rates drop. However, the current flipping status isn't proving profitable even at listing below ARV. As a contractor I was expecting 15% profit, but my flipped properties are just sitting accumulating 13% interest on private investor loans. That being said I find it perplexing that other property flippers, who seemingly outbid me on deals, are managing to turn a profit. It's mind boggling to comprehend how their strategies are allowing them to profit in a competitive market.

Amidst these challenges, and with my son in our lives now I'm determined to not be a failure to my family. I'm highly motivated to forward, but have no direction at this point and in todays world it appears that many other property flippers and Airbnb hosts are hesitant to share their insights and advice. My intention here isn't to complain or come across as privileged. I am just trying to add context to my current situation and see what advice the cummunity has

Thank you so much.

[Scott Trench]

I am so sorry to hear about the tough year. Thank you for the courage to ask for help. Many investors are going through similar struggles right now, but few are willing to call a spade a spade and admit their challenges. 

Now, let's do some digging.

First, let's talk about the AirBnb properties - are they not meeting your expectations, or are they not performing? That's a big difference. If they aren't meeting expectations, but are still profitable, nothing to do but operate to the best of your ability, get a great place on the market, and keep going. If they aren't profitable, then it might be worth considering selling them. Perhaps that remodel you did added enough value to make it a profitable "flip" even though it was intended to be an AirBnB. 

Second, let's talk about the flipping business. The way you worded this made me think that you completed a flip, doing much of the work yourself as a remodeling contractor? Is that right? If so, then you have a big problem, in that your profits, just after materials, not including labor, are not materializing. That could be bad deals, but I bet it isn't. I bet it's just really hard in Phoenix right now, and you are competing with brand new construction. 

If I'm close, and your skillset is in remodeling, then why not go back to basics, and either go to work for a contractor, or start your own contracting business. If the profits aren't materializing, take a year or two and earn a great living working on someone else's projects. I think it is likely that investors will show you the ropes and their numbers in some cases if you express interest, and when you see a highly repeatable pattern emerge, you can resume your own flipping business.