In this video, I'm going to give you a tool, and it helped me build my Airbnb
business, which is currently worth more than $4 million.
I built it in less than four years, and I started with less than $4,000.
So let's jump right in.
Welcome back, Airbnb family.
So as many of you know,
I did start my business a long time ago with very little capital to start
with in Houston, Texas, I started with just over $3,000, and today
I'm currently in Dallas, but I've been expanding in Philadelphia.
We're picking up 15 properties.
We're halfway done with those, and we're on our way towards 100
properties, which is going to be an excellent year.
So with that, said a lot of you wonder how I do this without taking on the debt.
I don't have multiple investors who share my equity.
I don't have some big bank loan.
I've done this all bootstrapped.
And I started with $4,000.04 years ago.
And there's one key aspect to how I run
my business that is going to help you supercharge our growth.
So you can get up to this kind of level
much faster without having to borrow money from people.
And there's a concept, actually a couple concepts here.
I'm going to walk you through.
But first, let's talk about the valuation
of a business because, as you guys know, my business makes about $2,000.
2 million a year in revenue.
But why is a business worth 4 million if it only pulls in revenue to
the way you can evaluate a company as multiple of its gross earnings?
You can also do a multiple of its net income.
And so we're going off a net income here.
The hotel sector typically takes a 6.5 to 7.5 multiple of its net
operating income as the valuation for the hotel business itself.
So in my case, if you have a property
portfolio like mine, that would net 40,000 a month, well, that's $480,000 a year.
You multiply that by 6.5,
and that would be the income or the value of your company.
So if your company is making 55,000 a month, then you just do the same math.
And you're like, 610,000 a year times 6.5. And that's how you evaluate your business.
If you ever wanted to sell your Airbnb business, you could sell your LLC with all
of your leases and sell it for evaluation like that.
There's other considerations there, too.
But this is kind of like a fast evaluation.
If you ever wanted to know how much your Airbnb business is worth, there you go.
So moving on, though, we're talking about growing our Airbnb
business to be making millions of dollars a year to being worth all this money.
How do we do that? And how do we do that alone?
There is one concept I've already talked
about in previous videos, which is the velocity of working capital.
And what that is is when you invest money
into your business, how long does it take for that money to come back?
So let's say you're in the retail sector and you sell shirts.
Well, you're going to buy a bunch
of shirts wholesale, put it on a rack and you're going to sell off your shirts.
How long until you get your working capital back?
And in the retail sector can be a while here in Airbnb, you pay rent,
you buy furniture, you list it, and that money tend to come back all
within about five months because of profit.
And you have paid your six months,
six months of rent and are operating in the black, usually going into month
six, of course, depending on the market
and depending on your property and how well you host.
You can do better than that.
But that, I think would be a good average.
So you should expect to get your money back within five months.
That is looking at all of it. Right?
You're looking at the four five $6,000 you paid for furniture.
And let's say you're paying $500 a month in rent.
It's taking into account that you're spending that $1500 a month as an expense.
But what's strange about this is most
of those expenses come the first of the month, but you have money in your
pocket the 10th, 15th, 20th of the month, and you're getting it on your Airbnb.
Airbnb pays you on a semi daily basis for all of your reservations.
So what do you do with that capital that's sitting in your pocket?
You just save it till the first, pay your rent and then take your profits
and then reinvest your profits on the first.
No, no, you don't. You put it to work.
And in order to put it to work without
taking too much of risk, you need to know how to make a financial projection.
And that projection is going to be what
you think you're going to revenue on Airbnb for the month.
So you know, right now you have cash
in your bank account plus your projected amount of cash that Airbnb is going
to give you minus your expenses at the first of the month.
How much money should you have left over?
And you can invest money that you're collecting on the fifth or 10th
of the month and spend it on growth 30 days earlier than a normal person would.
A skittish person would wait till after they paid the rents.
But you you do it before and as long as you meet your numbers and meet your
projections, you can actually have that money you just invested on the 10th,
make you more money before the first even comes, and I'll give you an example.
So
let's say you open up your performance tab on Airbnb.
It's going to give you all these things
like your occupancy, your ratings, your earnings.
Well, click on earnings.
And you're probably going to see this 503 Byte error because Airbnb's been doing
some work on their west and they've got some bugs.
So go up to the URL and delete earnings.
So it's going to say Airbnb.
Com progress earnings, delete the earnings and reload the progress URL.
And then once that reload, then you can click on earnings.
Right. Because this is how Airbnb?
S been working lately.
Sorry about that.
No
matter how you get to your earnings step, you want to take a look at how much you've
made for the month normally over the last six months.
I'll kind of give you some numbers.
We could say in February, we had $28,000 in bookings on the first, I believe.
And from the first through the 10th, we got more bookings for the month
of February, and we had about $60,000 in bookings by the 10th.
Right.
So 28,000 60,000 on the 10th, continuous new bookings.
And we hit about $100,000 in bookings for the month of February by the 20 February.
Right. So these are same month bookings
by the end of that month, we are somewhere between 115 1220.
I'm trying to do this for memory.
And so February is a slow month.
And we did that much, which is nice.
But other months let's say we started with 38 to 40,000.
We hit $100,000 for the month on the and then $124,000 for the month
on the 20th and ended that month at about 100 and 4141 thousand dollars.
Right.
So knowing kind of this arc of your booking pattern,
you could say it allows you to sit at the fifth or 10th of the month and know
how much more in booking revenue you should get.
See, the reason why my portfolio performs this way is we have so many Studios
and one bedrooms that most of our bookings are last minute.
We also price our listings accordingly
that our calendars are completely open so we can win monthly bookings.
So you're seeing that we're getting three a month on average,
$3,000 a day in new bookings than average for a large portion of these days.
So if you have the same type of portfolio
as me, you'd see the similar maybe similar behavior.
But what you should do is don't take
my word for my booking pattern and try to cookie cutter paste it on yours to make
your financial projections, because that would be wrong.
What I want you to do is just in your phone on a daily basis.
Maybe at the beginning of the month. Not so important.
Maybe do it every five days,
but on the first of the month, go into your Airbnb portfolios.
If you have more than one and total up all the revenue you have so far for the month.
So 1 May. How much money do I have pre booked?
And I think we have, like,
50 $55,000 in bookings for the 1 May, and it's not the 1 May yet.
So I put that number on my phone five days later.
Look and see how much you have in incomes
on the fifth, I would imagine that we would have about another 3200 a day.
So I would say that I'm going to guesstimate that if we had 5555
thousand to start with, we would be somewhere in the 72,000 Mark.
We might be at 75,000, something like that.
Then the 10th to do the same, 15th to the same and then the 20th do the same.
So every five days, put in your phone how
much you have for current monthly bookings and then the last ten days of the month.
I want you to take a daily tab, right?
You're gonna notice that you get a lot of middle of the month growth if you're
like mine and then it tapers off at the end.
You're not gonna get $3,000 a day every single day of the month,
because if you think about it, when somebody books on the 10 May,
they have a 20 day arrival window as long as their arrival starts in May.
You'll get paid in May.
So if some of these books May 24 through June 30, you get paid from May 24 through
June 22 because they pay you for 28 days up front.
If they book May 28 for three days,
you get paid for the whole three days or May 28 for 20 days.
You get paid for the whole 20 days in May.
So you can still make a lot of money
in new bookings the last ten days of the month.
But once you get now, it's like April 26, people have to arrive the 27 or the or
maybe even the 29th for you to get paid by Airbnb that month.
So I only have a few days left in the arrival windows.
So my new booking revenue should be tapering off right now.
Something fears.
But the 21st, 22nd, 23rd, we are still getting $3,000 a day in new
bookings because all they have to do is arrive in April.
They don't have to just only be staying in April.
You can actually get a lot of your May revenue in April.
Makes sense. So
what does this mean for you?
You take a couple months where you start
to identify the booking pattern in your city with your portfolio.
You can on the fifth of the month,
take the couple months of data that you have and go.
If I have $30,000 actually say any number five X dollars in bookings on the 10th,
I will have on average, 700 more by the first of the next month,
or I'll have an average 100,000 more, or you might even notice it's a percentage
that I have 25% of my booking revenue on the 10th, and it's always 25%.
And by the end of the month I have four X of what I had on the 10th.
If you can come up with a pattern
with the way that people book your properties and pay for your properties,
you can take that pattern and you can take it to the bank, figuratively.
So using this money, let's say you have $30,000 in the bank you can play with.
You need to spend $50,000 on rent on the first, right.
If you spent all $30,000 on new
investments, you need 50,000 more dollars by the first.
So if you can have a financial projection,
tell you that you'll have 90,000 in bookings by the first of the month,
then you have safely $60,000 more in revenue.
You can reinvest that $30,000 into new properties.
And if you did that on the 10th and you
can launch new properties quickly like I do and have them live within a week,
you could actually have a few properties, five new properties active by the 20th.
And the fun thing about that is, let's say three of those five properties
book for a week longer, longer stay on the 22nd, 23rd.
You have new revenue from those new properties.
So that projection of 90,000, you might even make 95 or $100,000
by the end of the month, because you reinvested that $30,000 on the 10th.
And now you have more properties and new bookings.
And now that growth allowed you to actually accommodate more expenses
by the end of the month, if you needed, it makes sense.
Things you'll need to consider is
for every property you have, you're going to have an increased cleaning cost.
You're gonna have more rent, you're gonna have more electric payments.
You're gonna have more Internet payments, et cetera.
So whatever that cost first of the month was, let's say your rents and expenses
were $50,000 for the month, you add three more properties.
You have to add the rent, right.
So your expenses could be $55,000 at the first of the month.
So when you spend that $30,000 and you needed 50, now say you needed 55.
So if you have that projection of 900, you should still be safe.
But put that $30,000 to work quickly so you can make some money back on that.
And so this is how I've continuously snowballed my profits into growing
exponentially faster than somebody else could because somebody else would pay
their rents first, take their safe profits and then reinvest their safe profits.
I like taking some risks.
I put all of my money into play,
and I use financial projections to let myself know if I'm going to be
overextending myself or if it's safe to reinvest a certain amount of money.
I hope this is helpful to you,
because if you're ambitious to grow a big business, you really need to know how
to kind of ride the lightning per se financially.
And I hope you all are well on your way
to building your million dollar Airbnb businesses.
If you have any other questions, I'll leave them in the comments.
That's why I'm here. Thanks for watching Airbnb automated.
Go get it. And I will see you on the other side.