welcome back Airbnb family today we're gonna talk about a discussion that has
been passed around in my social circle a lately which is whether it's better to
go for equity or cash flow when buying your first Airbnb home now I have a very
strong opinion on this and I'm sure plenty of you do on either side of the
fence but mine is gonna mess with you here my opinion..
Don't buy a home! don't buy a single property if you want to be an Airbnb host and there's a very good
reason for this we're gonna jump right into it it's a very simple math problem
if you want to have multiple Airbnb properties and be successful as a
business don't buy your home so here we go let's say you are buying your first
investment property you need 20% down because it's a non FHA you're not gonna
live there you're gonna run out the entire place on Airbnb which means since
you're not living there it's an investment property 20% down so let's
say you buy a $250,000 home with two bedrooms and your 50,000 down you also
need to upgrade it possibly and furnish it so you're looking at potentially
$70,000 a month before you're live on air BnB now that two-bedroom property
will profit you maybe $5,000 and that is including your equity because you'll
have to pay property taxes utilities pay for your cleaner etc and in this example
the other person's gonna pay for their cleaners too so let's keep it even so
you're gonna make maybe sixty two to sixty five hundred dollars a month on
your two-bedroom and your profit after all the costs will be five thousand
dollars including your equity and so seventy thousand and five thousand
dollars a month out okay that's the homeowner side now I rent my property
i furnish them and then I short-term rent them now let me tell you what I do
with my seventy thousand dollars in this situation I get ten properties right it
cost me about seven thousand dollars per that includes my cost of getting my
first lease the furniture everything okay so at ten properties
my rents are probably about fifteen hundred dollars in average with my
utility costs sixteen fifty I don't have to pay property taxes everything's
worked into the of course into the rent and I don't have to worry about insuring
my my appliances the landlord has to fix the plan
if they break things like that so 1650 and costs plus my cleaner costs I make
about three thousand dollars a month of my property so let's say just you know
conservatively I make nine hundred dollars per unit so ten units that's
nine thousand dollars a month where homeowner with their seventy thousand
dollars is now making five thousand per month so you can see I'm already ahead
by four grand a month but it doesn't even end there so the cool thing about
doing rentals is you can grow in smaller increments the moment I have another
seven grand I can put another property and have eleven right so first month I
make nine grand I can put seven thousand towards another property I make another
grand my second month I can put another property down my third month I make
another nine grand I can get almost two more properties my third month so by
month and a month three I'm looking at about fourteen properties which is
outstanding the person who owns a home they need to actually make profit for
fourteen months before they have seventy thousand dollars again before they can
get their second property now some of you homeowners are gonna say well I gain
valuation of my property because it's going to appreciate in value by like
three percent on average a year well let's factor that in so let's say that
your $250,000 home makes 3% a year you're looking at about seven thousand
dollars a year in appreciation so let's break that up to like six hundred and
fifty dollars a month and appreciation so you're making five thousand now let's
add the 650 so you're making fifty six fifty per month including your
appreciation I'm still making nine I'm still weaponeer there but let's talk
about housing bubbles right you could lose money on your property this could
actually happen also you could buy a home in a terrible part of town that's
not good for air B&B which means you own it you're gonna have to sell it or turn
it into a regular rental property which is not why we're here we're here to make
more money than that if I get a property where I lose money which I've done
before I just cut the lease right I'll even buy it out early if I really want
to get out of it fast so at worst case scenario I'm stuck with a property for a
year but it makes me more agile I'm in I'm out I find the right neighborhoods
and I make all my money that way and I do this completely legally we're gonna
actually cover this in a very recent like very near future video I'm gonna
actually show you the legal process that I take to pick up all of my leases and
homeowners or property management companies they can't
do anything about it they are stuck with me at least to the end of the lease so
we're gonna talk about that later and this is going to be the secret to making
your fortune on Airbnb but to keep on topic here don't buy your property it's
sluggish it's slow you need way too much money to get in initially now you're
money stuck in your property if you have to turn it into a regular rental which
is no fun it's just not nearly as profitable and it's a little harder to
manage too because you're stuck replacing your own appliances so I don't
if it's no breaks I'm like hey maintenance come in fix my stove thank
you goodbye and it's a lot easier for me to track my expenses too because
everything's kind of rolled into my lease agreements so if you have any
other questions kind of on this topic or maybe even like just some fast facts on
like how to host certain ways if you have certain problems that you've had
with guests or you know with your listings feel free to leave me a comment
below I'll be happy to help you out you just let me know what you need leave the
comment now like this video share it with your friends and of course if you
want more content like this you subscribe more is coming and I promise
you very soon I'm gonna teach you the legal way that I picked up my 20
properties without owning a single one so thank you for watching air B&B
automated I will see you on the other side
car