Latest / Financial Survival Network / The Future of Airbnb Investments - Brian Boyd #6080

Transcript

The Future of Airbnb Investments - Brian Boyd #6080 · Financial Survival Network

0:00
If you're able to start getting into real estate investing, it may not replace
0:04
your income the first year, but by the year five you should be well
0:08
on your way to leading the nine to five grind. Because if you think
0:12
about it, let's say you make sixty thousand dollars a year. Okay,
0:16
well that's roughly five thousand dollars a month. You know a good airbnb somewhere
0:20
would pay that, and if you're managing that yourself, then you've replaced your
0:25
income. You're listening to Carrie Letz's Financial Survival Network, where you get valuable
0:30
information you just can't find anywhere else to thrive in today's trying times. You
0:36
need the Financial Survival Network now more than ever. Go to Financial Survivalnetwork dot
0:43
com and get your free newsletter and gift. Financial Survival Network now more than
0:49
ever, and welcome you are listening to and watching the Financial Survival Network.
0:57
I'm yours, Carrie Lutz. Hey, you think about getting into real estate.
1:02
Maybe you've had a couple of brushes with it in the past, but
1:04
you're not quite sure what to do and how to do it. Well,
1:10
I've got a fellow attorney on with me, written a book, a book
1:15
that you're definitely going to be interested in. Highly recommend it. It's called
1:23
Replace your Income and it's by Brian Boyd, the attorney in the Great State
1:29
of Tennessee. Brian, thank you for coming on the show. I know
1:32
you're a fan and it's great to have you on. So when you say
1:37
replace your income, what does that mean exactly? Yeah, and that's a
1:42
great question. A lot of people, you know that they have to be
1:45
tied to the nine to five job, and you just don't. If you're
1:49
able to start getting into real estate investing, it may not replace your income
1:53
the first year, but by year five you should be well on your way
1:57
to leading the nine to five grind. Because if you think about it,
2:00
let's say you make sixty thousand dollars a year. Okay, well, that's
2:05
roughly five thousand dollars a month. You know a good airbnb somewhere would pay
2:09
that, and if you're managing that yourself, then you've replaced your income.
2:15
Now you get into this idea of scaling and you put two or three airbnbs
2:19
together, then suddenly you're making a lot more than you were at year nine
2:23
to five by managing those properties. But if you're notged in the airbnb market.
2:29
You know, buy a duplex and live in one side, rent out
2:32
the other, and that's a great way to house hack your way into real
2:37
estate investing because the other side of that duplex is going to pay part of
2:42
your mortgage, is it not? I think the answer is clear. It
2:45
is. Moreover, the tax benefits associated with real estate investing cannot be found
2:52
in any other asset class that I know of. And you're an attorney,
2:55
you're a former New York attorney. You know this is as well as I
3:00
do. That real estate investing provides you a tax incentive to invest and provide
3:07
housing for people that otherwise can't afford it. Now, I say that understanding
3:12
that people are out there listening. What do you mean people can't afford it?
3:15
Well, there is a need for affordable housing in this country, and
3:20
if you're able to meet that need, you'll have grateful tenants. You'll be
3:25
able to purchase additional properties and continue to scale, And I think that's where
3:32
you'll see the rewards of real estate investing, not only through depreciation and cost
3:38
aggregation studies that will all set your income, but you'll also create generational wealth
3:45
there's no other asset out there than does this all right, So when you
3:49
talk about airbnb, though, hasn't that sector gotten very saturated? Is it
3:55
harder to make money at it? Now? I seek your You've got a
4:00
point there that there are certain markets throughout this country that are saturated and it's
4:06
a lot more difficult now to make good money. But in cities like Nashville,
4:12
Tennessee, where we are the bachelorette capital in the world, metal tab
4:16
Yeah, you're gonna get run over by a pedal tavern if you get on
4:19
town. But those properties in the airbnb market in nashvilltonn See are doing just
4:26
fine. Another example of properties doing well in the short terminal market is Gatlinburg,
4:32
Tennessee. That place remains in the top ten of every list out there
4:38
for great investments in short term rentals. Blue Ridge Mountain, Georgia, there's
4:43
another great location. So I would say, well, go find the right
4:48
location, find the property, and I think you're going to be just fine.
4:54
Now, are you going to be in the same profit range that you
4:58
were during COVID people were looking to get out of their houses and go somewhere.
5:02
No, but that's for everybody. But there are still good markets for
5:06
short term rentals. So what kind of cash on cash return can you get
5:11
from an airbnb in the places you're talking about. So let's just use one
5:15
that I just did. I just bought a place in downtown Nashville. We
5:19
did a ten thirty one exchange from a triplex in Knoxville. Flip that over
5:24
to an airbnb in Nashville, and we're going from making thirty six thousand dollars
5:30
a year in rent for that triplex to a historical number of one fifteen to
5:35
one hundred and twenty thousand dollars a year for the airbnb in Nashville, Tennessee.
5:40
So you know it's a substantial increase for you. Okay, So but
5:46
you've got higher management costs because you've got to clean this place and you got
5:53
it linens, you got to sure, you got dishes in it, you
5:59
got to and people with it, all the things right, right, So
6:02
it's much more management intensive. How do you manage it? Well, we
6:09
have a property manager for that one. He takes eighteen percent. But if
6:13
that property kicks out one hundred and twenty thousand dollars a year, let's say
6:17
sixty thousand dollars goes immediately to pay the note, and then another eighteen percent
6:21
from there. So let's say we end up walking with fifty thousand dollars.
6:28
That fifty thousand dollars is profit to us that exceeds thirty six thousand dollars we
6:33
were capped at in Knoxville. Right, So we've increased our revenue, even
6:40
our net revenue I think. And by the way, not only that,
6:44
but we've stepped up our basis to do a cost segregation study to depreciate the
6:49
asset. So we're going to shelter all that money anyway, it's a great
6:54
way to go. Okay, So and how much did you put down on
6:58
that property? You go, we put two hundred and twenty six thousand dollars
7:01
down on that property. And so what's the net cash flow on it?
7:09
The net cash flow after we pay for the note and the property management fee,
7:15
it's probably kicking out three thousand dollars to four thousand dollars a month net
7:23
after everything's paid. That's pretty good, pretty good. So that's like a
7:28
twenty five percent the cash on cash return. Yeah, I mean it's look,
7:34
it's not like it's down on the Vegas Strip. It's not one of
7:39
those kind of properties. Is not a penthouse property. But for Nashville,
7:42
Tennessee, it's a good little earning property. And who could use it an
7:46
extra forty eight thousand dollars a year? Right? Heck yeah, heck yeah.
7:50
So what are the things that people do wrong when they go into the
7:56
airbnb market? Yeah, that's a great question. I'm glad you asked it.
8:01
They tend to overbuy. They they go and they look at a property
8:07
and they're like, oh, this is perfect. It's a four bedroom,
8:09
four bath, it's got a half bath, it's got a pool, it's
8:13
got a hot tub. Well, there's a certain niche in the airba world
8:20
that will stay there, but it's not going to be consistently rented because if
8:26
you have four bedrooms, four baths or they're probably talking at least eight people
8:31
stayed, right, and how many groups of eight do you typically have?
8:39
Not a whole lot? Those Those sound like party houses, is what they
8:41
sound like. I am encouraging people, Hey, buy a two bedroom,
8:48
two bath. You know, you and your kids go for the weekend,
8:54
spend one hundred and fifty bucks a night. You know, you get a
8:56
whole house and that will be a great little earning properly for you. Don't
9:03
swing for the fences. A'm small, mist small. Buy the small house
9:07
that you know is going to generate good money, it's going to pay for
9:11
itself, and it's gonna kick out a little bit of profit every month.
9:15
If you can do that and get comfortable with that, then think about scaling
9:18
up. But too many people just want to go swing for offences and then
9:24
suddenly they've got a house that's not renting and it's not paying for itself.
9:26
That's not a great investment. You need to look at the numbers. You're
9:31
a numbers guy. Look the numbers don't lie. Do the numbers. Do
9:37
the numbers? Do the numbers? Hey? So what about the concept of
9:43
rental arbitrage? Oh? Man, I know quite a bit about this.
9:48
A lot of people are cracking down on this rental arbitrage. And while I
9:54
think it is a phenomenal business plan, I mean you've got to be really
9:58
smart to have gotten into that. I think it's probably going to go away.
10:03
A lot of these buildings that they're renting these units and are getting wise
10:11
to it, and they know you're not actually staying in this property, and
10:16
the hoas are cracking down on it. Owners are cracking down on it because
10:20
instead of having one tenant in one unit, you're getting multiple tenants on a
10:26
regular basis, and the wear and tear is going up. So a lot
10:31
of the owners are saying, hey, stop that, and that's not what
10:33
we rented this stright, right, But there are people who perhaps you're having
10:39
problems renting at a single family home in a non HOA community and someone comes
10:46
along and says, hey, I'm going to do this, and I'll pay
10:50
you an extra one hundred or two hundred dollars a month to do it,
10:54
then it's kind of win win, right, Yeah, absolutely could be.
10:58
It just depends on what is tolerance level for you know, the wear and
11:01
tear that goes into your unit, right right, Yeah makes sense. But
11:07
hey, then you get to all the benefits of the airbnb, being an
11:11
Airbnb host or hostess without the initial upfront investment. Right. No, that's
11:18
true. I mean it's really it's going to take an economic analysis for you
11:22
to decide is this worth it for you? Because you could become a SuperHost,
11:26
right and you don't even own the property. And then you start scaling
11:31
your SuperHost across multiple platforms with houses here, apartments there, penthouses there,
11:41
and look, it's a great way to make a living. I know people
11:43
are making a killing doing Airbnb arbitrage, but there is a crackdown on it
11:50
right now, especially as Airbnb in the short term rental market has kind of
11:54
pulled back and you know, last eighteen moments, it's not quite as lucrative
11:58
as it was, and so you just got to figure out is it worth
12:01
it to do this? Yeah, and so if you're not owning the property
12:07
and you're just gonna arbitrage. And we should specify rental arbitrage as when you
12:13
rent a property rather than buying it with the sole intent of renting it out
12:20
as an Airbnb, realizing the difference in the monthly rental that you pay from
12:26
the daily rentals that you get on Airbnb, and obviously in certain places works
12:33
better than others. You want high demand. You know. When I look
12:39
at the pages, though, like in Florida, it looks like everybody in
12:43
their uncle our airbnbing their properties. You know, do you wonder No,
12:50
I am, I think you're right. You know, I was in Miami
12:52
last fall and you know, whenever I go to a town, I try
12:56
to figure out what's going on in this town to the airbnb's And there's some
13:01
gorgeous properties in Miami that I know aren't owned by the airbnb host because there's
13:09
one guy I was falling on social media and he was like, a I
13:13
don't own it, I just arbitron. And you know this one particular guys
13:16
like, look, I'm netting ten grand amarn't. I'm like, well,
13:20
that's wonderful. But to your point, I think Florida is full on Airbnbs.
13:28
There's a popular destination called thirty A down on the Gulf Coast, and
13:33
you know, I know people that have multiple properties down there because the rental
13:39
market is so strong for short term. So it's yeah, Florida is a
13:43
great place to invest if you're looking to invest, but be careful about the
13:46
saturation of the market, and maybe it's better to go to less popular destinations
13:54
like Miami, Fort Lauderdale, you know, West Palm Beach, Yeah,
14:00
Slee Lessert, the lesser traveled ones. I mean, I have a friend
14:03
who's making six figures she owns or well, it's funny story, Brian,
14:09
she bought her home, single family home. It had been added on to
14:13
it's in court Saint Lucy, and she split it down the middle basically and
14:20
put in a kitchenette and it's two bedrooms, separate entrance and separate driveway.
14:28
And so then she bought two or three more and it's cleaning clock. Her
14:35
average Delhi rental is one hundred and sixty five dollars a day, which ain't
14:41
bad. And Scott ninety five plus percent occupancy rate. Wow, that's that's
14:50
impressive. A ninety five percent occupancy rate. That's incredible, super host like
14:56
no bad reviews. I always like to see one or two bad ones because
15:03
that makes your your positive reviews that much more credible. And yeah, ninety
15:11
five percent. There is even expansion potential in some of these, you know,
15:18
putting in a pool, putting in a cabana which wouldn't require a wouldn't
15:26
require rezoning or anything because temporary structure. But you know, just cool things.
15:33
And Port Saint Lucy is like, you know, but you know what
15:37
it is as people that go there to visit relatives and all that. Not
15:41
a lot of hotels there. What about the fact that airbnbs have become as
15:48
expensive as hotels in many places. Now, well to that, here's what
15:52
I would say is you're getting an entire house or an entire unit, right,
15:58
it's not just hotel room. You're getting kitchens and like in some of
16:03
my airbnbs, we have hot tubs, kitchens, game rooms. You know,
16:10
there are a lot of ancillary things. I have one air view b
16:14
that I offer a vehicle with. So if you don't have, you know,
16:18
a rental you're flying into town, you can you can rent them when
16:22
that comes with the house. And so for touro or no, we do
16:27
it straight through the property manager out there, you know, just gives your
16:33
licensure your give us your license, give us your insurance, sign this waiver
16:40
and you can use the vehicle. And we do that because that particular property
16:45
has kayaks that you can go kayak the river with. And so you get
16:48
that truck, you can put the kayaks in and go, you know,
16:52
kayak the river. But you know, it's just one of those nice things
16:56
that we provide along with the house. That's pretty cool. I heard of
17:02
people doing it with kayak, but not direct like that, but that's interesting.
17:06
Hey, So besides Florida, Tennessee, what are the markets who're seeing
17:11
like real growth in well. I think you saw a lot of growth out
17:15
in Montana over you know, the COVID years. I think it's started to
17:19
slow down. Bozeman is still growing pretty quickly, even though they passed an
17:25
ordnance not allowing airbnb in certain parts of the town. But it doesn't mean
17:30
there aren't private residences that are still airbing being their houses. So I think
17:36
you're going to see continued growth out west. You know, the Denvers,
17:40
the Vales, the Bozeman's, the Missoulas, the boiss You know, people
17:45
want to get out and want to be in the nature h you know,
17:48
the rivers, the mountains, the streams, you know, the wildlife.
17:52
You know, you're seeing a lot of that explosion out west of people just
17:57
saying, hey, we'd like to get out and see something else. I
18:02
do think that there are still growth opportunities in places like Tennessee, Texas,
18:07
Florida, South Carolina, North Carolina over like Asheville, North Carolina. Even
18:15
the Outer Banks region of North Carolina is a good little market. Charleston,
18:21
South Carolina is a good market. North Georgia, the Blue Ridge Mountains are
18:26
a great market. I think Austin is definitely pulling back. I think it
18:30
got oversaturated during COVID, and I think they're passing ordinances now to limit airbnbs.
18:37
I know Dallas passed one, you know, in December, basically banning
18:42
airbnbs. So there's still a lot going on in the country. I know
18:48
people aren't really pleased with California right now, but California is a gorgeous state.
18:55
It really is. And there are places within California that, yeah,
18:59
you could probably kill it in their B and B in your neck of the
19:02
woods in New York, the Finger Lakes, Regent gorgeous in the summer,
19:07
gorgeous. You know, is it Lake George that you guys have up there
19:11
that is you already? I mean, that would be a beautiful place.
19:15
You know. Let's look at Michigan, the Upper Peninsula. A lot of
19:18
people like to go there. There are still opportunities out there, but you
19:22
got to think outside of the box. You gotta think outside of your region.
19:26
Okay, all right, well, hey, we appreciate your coming on
19:30
again. You should check out Brian's book Replace Your Income and it's on Amazon
19:37
and sold wherever find books used to be sold. And got a question for
19:44
Brian or myself. The email address is kl at Carrie lets dot complication.
19:48
Answer quick and Brian, just tell us your site where we find you.
19:53
Yeah, you can find me on social media on Instagram at Brian T Boyd
19:59
and that's also on TikTok. If you want to find me on Facebook,
20:03
it's Brian T. Boyd. You can just type and replace your income.
20:06
It'll pop up. If they need to talk to me for a legal issue
20:08
or tax related matter. You know, I'm at Thompson Burton. It's a
20:12
firm here in Middletonnessee, and they can find me here. That's where I
20:18
am right now. And not to mention your main site, which is a
20:23
Briant Boyd dot com and the link is in the show. That's this interview
20:29
on Financial Survival Network dot com. While you're there, please sign up for
20:33
your free newsletter. Brian A total pleasure, Thanks for stopping by, Thanks
20:37
for having me here. I appreciate it. Thanks for listening to Carrie Letz's
20:41
Financial Survival Network, your solution to today's trying times. For the latest,
20:48
go to Financial Survivalnetwork dot com. Financial Survival Network now more than ever