AIRBNB is the NEW BRRRR and NEW Flip!

[Rob Bergeron]

First of all, who cares about interest of x when you are bringing in 2-3-4-5-6-7X in profit? Right now we all need to be SECURING THE ASSET. Someone recently said this and I loved it "Marry the house, date the financing." Interest rates will likely get lower again sometime or another, right now we just need to focus on getting the properties that cashflow. We aren't talking small guys, we are talking big boy airbnbs sleeping at least twelve people. <---this is where the money is made!!!! (Unless you curate a completely amazing experience for everyone). The reason I think Airbnb is the NEW BRRRR and NEW FLIP is because I am a fan of this strategy. First, appraisals are coming in lower and lower each day. I practice real estate in Louisville, Kentucky and in the last two-three years I had only two appraisals come in low that we couldn't argue our way. In the past six weeks I have had FOUR. This tells us two things, that flipping is in a tough spot because appraisals are coming in low. It tells us that traditional BRRRRing is risky because more money could potentially be tied up on a long term rental. Airbnb is fine, money can get left in the deal because you get money back so much faster than traditional real estate. Which is why it is essentially a BRRRR either way, turnkey or needing work. The way Airbnb is the NEW FLIP. Hold for one year, get a T12, sell property as a functioning business and then 1031 into a more desirable asset (large multifamily or an airbnb that you, your friends, and your family can personally enjoy at a much higher rate. I love talking about this stuff, you should hear about some of my tax saving ideas. Do we need to do legal disclaimers on here that this isn't financial advice? If so, that.

I posted this in the short term rental forum, but figured I'd share on our local forum as well. 

[Scott Trench]

BRRRRBnB for the win! 

I think there is a lot to be optimistic about in the STR space, but I think that it won't be all sunshine and daisies forever here. The cash flow is incredible right now, but that it is impacting values and driving prices up. In a recession, spending on vacation rentals will go down and people will be selling or not buying second homes and vacation homes. I fear that some of these folks will find that they are not able to sell the property for a big gain, and will have trouble managing cash flow.

Still, if you are going to do this strategy (BRRRR or Flip), I agree that STRs are a pretty good bet. They have so many exit options - they can be used as long-term rentals to protect on the downside, they are high quality assets, often in prime locations, that are likely to appreciate, and they can be refinanced or acquired with second-home mortgages. A lot to like.