All Forum Posts by: Account Closed

I'd think you'd add the most value to an investor that owns in your town but doesn't live there, or someone with a lot of properties. You can be the on-the-ground guy, so to speak.

You might just talk to some hosts in your area and just hear what they deal with. Then when you notice the same complaints, just offer to do those things. 

There's a lot to managing and co-hosting (listing set up, pricing management, guest communication, cleaner & maintenance management, etc etc), but it doesn't make much sense to "offer" a bunch of stuff if those aren't their problems.

And like John said, some places have certain rules. Just look those up or call around and do it. Often it's a fee and/or a small test.

Good luck.

The lowest I've seen for a second home is 20% down. Some require 25% if they know it's for STR, but not all.

Not sure how much I'd try to hide though. It's still a great strategy, even doing everything legit.

The other two answers hit the pros and cons on the head.

I think all that's left is the math. For the STR side, grab the AllTheRooms data for your area and download the CSVs for 50th and 75th percentiles of Occ Rate and ADR for your number of rooms and occupants.

From there it's simple enough to calculate and compare annual revenues, depending on how well you think you can do. With very careful management hitting the 75th percentile shouldn't be that difficult.

You can go deeper, but this is a quick and cheap back of the napkin type math for STR.

So I don't have a specific property in this one. It's more of a pre-analysis of an area I'm looking at for STRs and outlining how I think about narrowing down where I like. I expect most on here go for LTR, so maybe a peek into how our STR analysis happens is interesting to an investor.

Our goal is to find some areas that are favorable. Or if a passive investor likes a particular area (a bonus of owning STR is it can also be your vacation home) we could dig into that area too, dig further into refinance math, etc. We can monitor them as things come along, filtering what we don't want right away, and we have a big head start on knowing if it's a great deal or not. If the area is no good from the analysis, we can save a lot of effort. I've recently done the same for Destin, Florida (a very specific condo my wife liked :D) if anyone is interested in that.

Area:

Nashville, Indiana. Quaint tourist town in the hills of south-central Indiana. Largest state park with hiking, biking, camping. Hugely popular when the leaves change.

I’ve got lots of personal connections to the town and local government. 

Market Data:

Pulling all home sales in the past 24 months that sold for under $300k:

Median 1 BR $168,000
Median 2 BR $174,900
Median 3 BR $205,000
Median 4 BR $229,500
Median 5 BR $207,000

I kept it under $300k because a) a lot of turn key places are more than this which defeats the purpose of BRRRR, and b) this felt like a typical range for what "normal" people can get as a second mortgage (ie a passive investor who brings the money and/or mortgage, depending on the property).

While I did have to use Zillow for this, these numbers seem promising, given the ability to buy at a very low price - under $250k - relative to the income it can produce in that area.

Short Term Rental Data:

I used Airdna’s data for the area.

Something I noticed was a big jump in ‘entire home' data in April 2019 and local government connections show us the town is opening up to the idea of STR via Airbnb/VRBO. Speaking to someone on the town council confirmed this. The town does require certain exceptions to be petitioned to the town council in certain areas of the town. These hurdles keep the total number of homes available on Airbnb low, but provide massive opportunity for those willing to go through it.

I’ll add that homes that resemble cabins are the most popular by far. Nashville, Indiana and Brown County have a type of back woods and nature feel. “Rustic” is thrown around a lot.

Per Airdna data:

Market Grade A+, Investability 100/100, Rental Demand 89/100, Revenue Growth 98/100
2 BR most popular, but 1 BR and 3 BR very close behind. Not many 4-5 BR, almost no studios.

Anyway. I began by pulling all data from Airdna, by month, number of rooms, and percentile into a spreadsheet:

I have a light background in data analytics, so this part is very enjoyable for me.

Now, the thing about Airbnb is that a HUGE majority of people that list do not do a good job. Rarely you’ll see great photos and an excellent description. Most people set a price and forget it, and ignore seasonality, especially in this town for some reason.

Active management is crucial. Our team’s Airbnb expert James Svetec (co-writer Airbnb for Dummies, at one time top 1% of Toronto listings) says with active management, getting into the 75th percentile is quite easy.

So, if we take all the months together and get average of the 75th percentile in Average Daily Rate (ADR) and Occupancy rate (as a percent of nights booked per month) for entire house listings on Airbnb we get the monthly revenue:

1 BR: $3,784
2 BR: $5,757
3 BR: $6,354
4 BR: $8,423
5 BR: $10,358

Another note here is that 2020/COVID was a boon to STR. Many more people traveled using Airbnb to avoid hotels, and rural/nature areas like this one did the best of all because everything in the city was shut down. The data above was calculated using Apr 2018 - Dec 2019. If the trend of 2020 continues, and the 75th percentile is achieved, the numbers would be much higher.

Quickly you can see that even purchasing a turn-key property here - assuming you do the work to get it approved by town council if required - could produce fantastic revenue. I did the full math anyway, see below. (I know, it’s not the BP Calculator!)

Large assumptions, trying to be conservative:

Purchasing a 4 BR home (or larger, if possible)
$250k purchase price (bit over median)
20% down, 5% fixed interest, 30 years
$4k closing costs
5% CapEx
$70k rehab
Normal internet, TV, yard/snow, etc|
Out of pocket $300/week rented cleaning*

*Airbnb guests usually cover this, however if you follow Airbnb news, there’s always a rumbling of guests upset they have to cover this cost. Putting it in removes about 6-7k/yr from the bottom line as a conservative estimate. If it never changes, great! We keep that.

Expected results (using 4 BR, 75th percentile ADR & Occ)

Conservative results (using 3 BR, 50th percentile ADR & Occ data)

Even if we found a four bedroom at this price and did absolutely horribly (even by 3 BR standards), it could cash flow $472, >4.5% CoC. Put in normal active management and it shows $4500 per month cash flow across the year and >40% CoC. Double the price of the place to $500k purchase price with the same rehab budget and it still cash flows $1800 with mediocre management. Again, this is with pre-COVID data. If we include 2020 and 2021, it's even better.

I'd say Nashville, Indiana is worth a deeper look.

Thoughts?

@Sakib J. Get the place spotless and ready to list, then bring in a professional photographer. Create a great description and headline. Buy the area's data from something like AllTheRooms so you know what to expect. Stay on top of pricing and the occupancy rate expectations based on the data. Get a boots-on-the-ground person, maintenance help, and a cleaning team. Then get at least one back-up of all of them.

Hi, first property time! Looking for recommendations for Indiana mortgage brokers for short term rentals / Airbnb. 

I've got one pre-approval already, but wondering if there's a great local lender or broker for a second mortgage.

Looking at properties in the Nashville, IN area. Thanks

@Gloria N Gear Sounds great! I've been this close to joining CIREA a few times but their site is old and I couldn't tell what they're doing next, how involved they are right now, and what it is they do regularly. Good to know they might be worth it. I've joined a handful of central Indiana fb groups on there already and just lurk, ha. 

I can build and manage Wordpress - Divi, Elementor, etc, linking to autoresponders, etc etc. You can message me with questions.

What I'd do is begin by creating as many use-case videos as you can and upload to YouTube. So like, a quick video showing a specific problem it solves. Update your Facebook page.

Next, I'd find as many reviewers online as you can. So like, start with low-to-medium sized audience types who you can give them the product and let them use it and give you feedback. If they like it, you say, they can share it with their audience. Borrowing the authority of someone else is a quick way to go. 

Similarly, find a bunch of podcasts to hop on - but not in a salesy way. Also you can find someone with a large audience and offer to teach (not sell) their audience something about renting. Then they hand off the email list of who registered and suddenly you've got a bunch of emails you can put into your autoresponder for nurturing.

You can also pay for pre-roll on some popular related YouTube channels, or buy Facebook ads for audiences that are fans of two or three related things, like "real estate" or "rentals" but also drill down into some of the more popular software programs already out there.

There's a million ways to grow a brand online but that should get you started.

I recently began grabbing the csv data from Zillow and Realtor and plugging it into Data Studio, but unfortunately it's really broad strokes. The idea is create filterable information by zip code or county over time, like $/sf averages, median prices, drops, listings, and so forth. Basically, see what I can glean from the publicly available data columns within the area(s) I want. Mix crime data or things like that in there and you can (maybe, eventually) Moneyball it down to one number for the investability (my own word) for a zip code. Wouldn't that be sweet? I spent a lot of time last year doing the same thing in a pet project for drag racers which I enjoyed but ultimately wasn't profitable. Selling people on the idea that big data can help them is extremely difficult. 

What I am really interested in - and my agent hasn't been able to give me the csv quite yet because I don't know if it exists - is data on each individual purchase and the amenities. Granted I'm new so I could be wildly off track, but I'd think that when flipping in an area (especially if it's a new area) it could be beneficial to know that x% of homes sold within y timeframe have n amenity, x% have m amenity, etc. When overlayed against $/sf or price, my thought was to see exactly how much return on investment certain upgrades get for a given zip and which are "must haves" in a flip and which might be a waste of time and money. With the right amount of scraping and database management though, that stuff could be pulled from Zillow I suppose.

Hopefully that made sense. I'd be super excited to see what you come up with though, whether for marketing like you say or something else like my example above. Overall, I think the DFY software could appeal to tech savvy folks that see the literal dollar value that it saves in marketing (saving me from sending 1,000 postcards a month for example), but that'd be up to you to prove that through various case studies depending on which way you go with the software.