[Music] investing in airbnbs can be incredibly lucrative but to make money you first need to find the right property because let's face it you can also lose money if you buy the wrong property and no one wants that in this video I'm going to show you how to do two things first I'll show you how to avoid losing money investing in airbnbs even if everything goes to and then once you've done that I'll show you how to actually make money and ideally lost of it by buying a home run property if you stay till the
end I'll show you my secret to finding Hidden Gem properties these are properties that get overlooked by other investors let's Dive Right In and show you how to keep your hard-earned money and avoid potential losses to do this you need to focus on one thing above all else cash flow here's the stupid simple math if you bought a property in North America at any point in the last 15 years you made money unless unless you sold it at the wrong time you see if you zoom out on a graph of North American home prices you
see a line that goes up and to the right perfect everyone's making money when you zoom in you see that there were a bunch of smaller ups and downs along the way so the trick with real estate investing is to wait if Now isn't a good time to sell then hold on and wait until it is a good time to sell simple as that so rule number one assuming you want to make money and not lose it is to buy properties that cash flow meaning every single month they bring in more money than you spend
paying the bills and with short-term rentals there's an extra layer to this obviously short-term rentals can have inconsistent cash flow month over month unlike long-term rentals the rent that you collect varies every single month so when you're looking at purchasing a short-term rental property you've got to assume the worst you can use a site like airdna to see year-over-year trends seasonal Trends and low performing properties all this data should give you an accurate idea of just how bad things can get and this is exactly the opposite of what almost every investor does most people only
look at the best case scenario and that can really bite you in the butt as a good rule of thumb make sure that even in a worst case scenario you're still going to be able to at least Break Even if you want step-by-step tutorials that show you my exact process for this then check B&B tribe for just $49 a month you'll get access to all the tools you need tools that will help you with everything from the analysis to the purchase to launching and more if not you could very well end up like this investor
or this one or this one or any of the hundreds of others who have taken devastating losses by failing to mitigate their risk all right so now that you've checked to make sure you aren't going to lose money it's finally time for the fun part next let's look at how to find properties that are profitable including my secret trick for finding hidden gems now I like to break this down into three stages and stage three is by far the most important the first stage is where we compare Revenue to purchase price the best way to
do this is by using a site like airdna to find the average revenues of each size of property once we've got this we can use a multiple to quickly figure out our Max purchase price for a given size of property the multiple that I found to work best at this stage is right around 8 cuz by the time you calculate cash on cash return with a 20% down payment assuming current market interest rates and backing out all the normal operating expenses for the property 8 times be the magic number where you can still reasonably hit
a 15% cash on cash return but you don't actually need to know any of that all you need to know is eight take the average revenue for a four-bedroom property multiply that number by eight and you're done that's your max purchase price for a four-bedroom property easy as that now tell your realtor that you're looking for a four-bedroom property let's say within that price range and you're ready to move on to step two unfortunately step two requires more of something that I know a lot of people hate math now as much as I know their
retention on this video is going to take a nose dive as soon as I start talking about math I'd be doing you a disservice by skipping over it so instead I'll do my absolute best to keep it as simple as possible the easiest way to spot a great deal is with something called Cash on cash return and it's exactly what it sounds like how much cash are you earning in profit relative to how much cash you invested to buy the property and to figure this out there's really only three numbers that you need to know
number one you've got to know your Revenue this is how much money the property can bring in number two you've got to know your expenses this is for stuff like your mortgage and other operate expenses like cleaning and number three you've got to know your initial investment this is how much you need to spend on the down payment the furniture and other upfront Investments for number two and three they're pretty straightforward figuring out your potential revenue is by far the trickiest part so let's start there take a look at air DNA again this time refine
your search more so that it matches the property in question as closely as possible the filters that I like best are for the number of people it accommodates the number of bedrooms and the type of property you may also want to filter by category depending on the property from there just check to make sure that you've got at least 100 properties in your data set if not you risk having your numbers be skewed by a few outliers next scroll down to revenue and take a look at the last 3 to 5 years broken down by
percentile export that data and pay special attention to the 75th percentile column this is where you'll find the data that you need for running reasonable Revenue projections next up is expenses most of these will be available in your sell's listing if not just ask the seller to tell you how much they pay for things like utilities and property taxes then you'll want to call around and figure out what interest rate you can get on a mortgage call an insurance broker get some ballpark quotes and also shop around for cleaning quotes so you can Factor those
in as well once you've got your expenses the last step is figuring out your initial investment and figuring out your initial investment is also pretty simple just figure out what sort of down payment you'll need to make add in any Furnishing and renovation expenses we've got really simple tools by the way for all of this in B&B tribe and finally add in your closing costs okay so now you've got all the numbers you need and you're pretty much good to go Revenue minus your expenses will give you your cash flow divide that by your initial
investment amount and you'll find your cash on cash return 15% or more means you're in the clear anything less and you're likely better off to pass and it's at this stage assuming all looks good that I would typically place an offer conditional of course to give myself time for the final stage stage number three now in stage number three our goal is to make damn sure that we're getting a great deal because if we aren't then we could well be making a mistake to the tune of tens of thousands of dollars and that's all the
more reason to consider joining BMB tribe for a tiny investment of just $49 a month you can join a community that'll help you to avoid losing your shirt on a bad deal not only that but it'll help you to squeeze more profit out of your listing once you get it up and running so check it out the link to join is in the description down below all right now that we're on to stage three it's time to do a little more digging for this stage we're going to look at in individual comps comps are properties
that are similar to yours that either prove or disprove your initial projections from stage two to find comps go back to airdna and head over to the listing section with the same filters you use for stage two sort the results by revenue and take a look first find properties that are similar to yours next check if their revenue meets or exceeds your projections if so great if the numbers fall short that's a red flag there better be a clear reason why they're lower and at least several other comps that aren't if you've come this far
and the numbers still look good then pull the trigger and move forward if the numbers don't check out then it's back to the drawing board but want to know my secret trick for finding home run properties that other investors Overlook the trick is to look for hidden Revenue boosters and price slashers these are little details about a property that do one of two things either they help it to make more money on Airbnb without increasing the purchase price or they drastically lower the purchase price of the property without negatively impacting returns so think of things
like a spare room in the basement that can be converted into a movie room or maybe a hot tub that comes with the property or a place that needs some TLC or a place that's near the lake without actually being on the waterfront looking for these will make your property search much more fruitful if at any stage the numbers start to look dubious though don't be afraid to back out it's better to lose a few hours of time than a few months and tens of thousands of dollars with enough patience you'll eventually find a great
deal if you want my help to speed things up check out B&B tribe at the link in the description thanks for watching this video and I'll see you in the next one
