All Forum Posts by: Account Closed

You are not reading the conversation. The question was how many properties for $350K EBITDA (basically net earnings). In other words, after you pay rent for the property, cleaning expenses, virtual assistant, AirBNB service fee and any other operating expenses. That is not going to be $50K per property. Even if you could net $50K per property, it would take 7 properties to equal $350K, not 6. Finding 7 properties that net that much seems challenging, because high demand STR markets are also high rent for LTR.

That is the point, that expenses cut into your margin. So maybe you gross $350K, then pay out $300K in expenses and the net is only $50K. Then you need 49 properties to net $350K. That is 49 leases and thousands of guests annually. I am not saying it isn't possible, but hardly autopilot (despite what the 4 hour work week told you). 

The harsher reality is that you are not acquiring any physical asset. So there is no asset appreciation. You are just banking on a good STR future. The only exit strategy is to break your lease and close up shop.

Like much of the above, this is like the "up to 80%" sale. Good luck finding that on something you actually want. In my market, you'll be lucky to get half that gross. And the automate works but not always. Same with a virtual assistant. The fluffy trite presentation of the stuff as presented misleads a lot of newbies. Cannot put vacation rental on autopilot. Cleaners don't show up or go out of business.  Guests want recommendations or cannot find the place  and you need to be there to get them  in.  Your automated lock fails.  The power goes down. Handyman won't come when you need him.  The last guests trashed the place  and the new guests are standing in the kitchen wondering what to do. Your virtual assistant cannot do these things. Get a property manager, and there goes 30% of the gross.

"You can gross $50k with one unit. So $350k gross is like 6 properties.

You can automate almost everything with software and electronic locks. For cleaning just hire a cleaner, and for customer service you can hire a virtual assistant." 

Passive income is very possible in buy and hold real estate. I have tenants that I have not had contact with in over a year. I get electronic payment every month. Of course things do come up, but on average it is once a year per property. If I had a property manager, it would be mailbox money. 

You said you can sell it for millions. That is a little different than one million. Still even at a million that is a lot. How may properties does that $350K represent - like 200-300 rented properties? That is a lot of leases, a lot of guests and a lot of landlords to deal with. It is a job for either you or someone else. If you hire people, it cuts into revenue. 

The other issue is who will buy a business like this? If I wanted into the hotel industry, I can buy an entire hotel building for $1,275,000 or better yet, I can use leverage and buy a $5M hotel. I would actually own the building, which gives me tax benefit and an underlying physical asset. I don't see banks lending money to buy an AirBNB business that has no assets. Contracts can be considered assets, but in this case the bank will view it as a liability. I guess that leaves a cash buyer that wants a full time job.

Maybe I am wrong, that is why I asked for some examples of people who have done this. If you are grossing $350K with STR that are rented units and someone is willing to buy it for $1.3M, I would jump at that offer. I just see better ways to invest that kind of money.

Interesting topic. I am curious how many rented units are you managing? Are you doing all the guest interaction yourself? I will admit I am not an expert in this, so I am genuinely interested.

Do you think that your degree has helped you at all?

All I know is that the only thing I've used in the real world from school is basic bath, Spanish and PE, lol. 

I remember encountering this very situation when we were starting out with Airbnb. Right on with the minimum number of days and no instant booking. Keeps last minute bookings from happening too. Can't always accommodate a guest when it comes as a short notice.

Do you think that your degree has helped you at all?

All I know is that the only thing I've used in the real world from school is basic bath, Spanish and PE, lol. 

 Hopefully you can at the very least break even on it. 

What are the main reasons you now prefer arbitrage vs buying?