How to do a market research for a short term rental for you?

[Masashi Borges-Silva]

Background

“How do I even start with market research for Airbnb?”

This is the question that I was pondering for days, weeks, and years!! This is just a story in my experience and n=1. With that being said, I want to share my thought process and the progress I have been making. If you are still interested in how I went about the research and where I am at in terms of becoming a real estate investor, please read on.

First of all, for those who don’t know who I am, I would like to give you my current situation regarding the real estate investing journey.

Current situation

I am currently working as a full-time engineer, and in fact, I am typing this in a hotel room before attending a shock and vibration test for one of the suppliers in Long Island, NY (sorry this is not relevant information for real estate). I have been reading and studying about real estate investing, and I was “wishing” that things will change and let things happen in my life. Overcoming the first step is the hardest step toward my goals, and a change is uncomfortable. I don’t really want to do anything after spending miserable hours sitting in a cubicle (I am sure I am not the only one thinking that way), and I had to shift my mindset. The feeling of discomfiting is a good sign that I am making progress! (well, also I had to take care of my mental health before, but that is a topic for another thread somewhere else…)

Anyways, I am finding a way to achieve financial independence, and I started looking at different real estate investing types (BRRRR, house hacking, short-term rental, long-term rental, commercial buildings, residential buildings, and so on). I also began to look for investment strategies that can be used in New York City, and soon enough, as you might already guess that it didn't make sense (at least for me at the time and in the market). I don't have enough liquid!! What do I do now?? Well, I need to create more liquid!! So, I looked at all the expenses in my life and determined the biggest expense. Tax!! I realize that 24% of my salary is subtracted for Federal tax, and even more for the state, and city tax! Wow!! Wait a minute… How do I find a way to reduce them? Do I even have control over it?? Then, my question transformed into, "how do I reduce these expenses!?"

Save more money by reducing the tax obligations

Long story short, I did a little more digging, and I found that I can use short-term rentals such as Airbnb to generate passive income, and I can reduce my w2 income tax which is non-passive income. (passive income can be income from rent received, capital gain from selling stocks, and non-passive income is W2 income from your salary or wages)

How do I find a market that will generate passive income for you

Believe me, this is not my idea. I just read lots of books and a lot of them indicate that there are steps to take to find out where is a good market to invest for YOUR unique situation. There are tons of data available, and I just needed to sort the noise (junky) data that doesn’t help me reach financial independence.

Step 1, find out where is the population growth in counties or cities in the states. Ok, easier said than done. How do I start with this?? Grab a laptop and let’s do some research together. When I decided to research for my situation, I used https://worldpopulationreview.com/ and https://www.opendatanetwork.com/ This was a good starting point. This will give you a general idea of the area with positive population growth. Then, I stumbled upon Airdna.com and Mashvisor. Those websites were very helpful for me in determining the market that I wanted to invest in.

An example to find the right market for you

I ultimately used Airdna to do my research. There is a monthly fee associated with using the website, but I am planning to use this expense as a business expense write-off (remember, you have to invest money in order to profit). Once I had an access to the data by counties in NY, I just randomly picked on the map to see the score ratings. Since the website gives you a score rating out of 100, it was easier for me to decide where is a good place to invest. Then, I just googled a list of counties in NY state, and I created this list.

What is your ideal market for you?

This is really you have to decide what works for you. For example, how often do you want to see the properties? Do I want to drive for less than 2 hours to get there, or do I need to take an airplane to get there? Do I want to go there and come back in a day, or is your schedule more flexible so that you can stay there for a few days?

I was also having trouble to guestimate how much of a house can I afford. I would suggest aiming for a house for less than $200,000 and seeing what type of properties you find in the area. Oftentimes, at this price range, you might need to do a renovation. As I am a full-time engineer, I don’t have time to do the job, so I started to call around contractors found in Angi. I also started to call around to look for a home inspector, landscaper, real estate attorney, and general contractor. I was so afraid of rejection, but it was all in my head. So far, I have been lucky enough to find people who are excited to work with me!

The real estate business is a people business. There is no way I can accomplish what I want to do all by myself. If you are reading this far, the chances are that you are looking to invest in real estate, but haven’t had a big awaking call to push you outside of your comfort zone. I challenge you to try out my method and see where it leads you! Even in the worst-case scenario, you will survive. Don’t take anything personally. This is a business, and you will become financial independence and live the life you always wanted!