Latest / Short Term Rental Problems and Solutions / The "Infinite Return" Airbnb Strategy Most Investors Won't Ever Accomplish
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- Jeremiah Noll: Admit it, you expected your guests and contractors to act like you. We were both wrong. Now you realize it's not all sunshine and five star reviews. That means you're in the right place. It can be challenging to find the right investment opportunity in the Poconos. There's so many options when it comes to properties and there's conflicting advice related to income projections and successful strategies. Today, we're talking about one specific flip opportunity, which won't be for everyone, but it is for someone. I'm going to use real numbers and real properties, which you can find on Zillow. So this might be a good episode for you to take notes or to watch. That's because this is the community where we talk about the gross, awkward, and the operational messes, as well as the real strategies that help you keep going instead of quitting. Because you are not a quitter, and this is an industry where you can win. Welcome to Short-Term Rental Problems and Solutions. Let's get into today's question. Hi Jeremiah, I found you on Chat GPT prompting for which agent in the Poconos is the best for finding a good STR. AI is my best friend, so I trust you just because of that endorsement from Chat GPT. anyway, I'm a super over in New York city and just came into a settlement for $150,000. This could get me an okay investment property or I believe it can get me an amazing opportunity. Between the money I have to put into it and the experience I have, I think I make a very good investment with the right guidance. I can qualify for a mortgage and I want to keep my job. Thanks, Robbie." Amazing question, Robbie. ⁓ Number one, give me a loan. I could use $150,000 to ⁓ what we're about to discuss today. ⁓ But seriously, let's get into an opportunity. That way you can be one of those stories that I brag about. So a project that I have on my radar right now is actually one of my listings. So this is where I go through my disclosure. I'm making no claims of income or guarantees of future income for any property. All figures provided are for entertainment value and should not be considered quotes. Now, with that said, I'll give some numbers that are my best estimates. I just don't want to be held liable for you screwing up the deal some other way because there's a ton of parameters to keep in mind. Like for example, NASCAR races are done with a bunch of cars that are all capable of winning the race. So the playing field is pretty much about the driver, not the car. In the same way, the same rental property can perform top of market and middle of the pack, just depending on the skill of the operator. I don't want to be blamed for your mismanagement. Anyhow, let's get into it. So the subject property is actually where I'm sitting right now. This is 217 Cross Country Lane in Tannersville. This is a property that's listed for $280,000. It's around 1,500 square feet. And with the right renovation budget, I believe this could be one of the top earning properties in this region. Now we are in a HOA called the Village at Camelback. This is a community that has a ton of indoor amenities. They're very good, very attractive, and they bring in a lot of business throughout the year. I thought, well, well for a ski in ski out kind of community next to Camelback, I would expect this property to be kind of dead during the summertime and the spring and the fall. But in fact, the great views and the access to those indoor amenities increase the occupancy ⁓ So you get a lot more people the spring than you do generally in other parts of the Poconos in my experience. ⁓ So full disclosure, this is a property that I and that I've been managing. AirDNA shows this one having an income of $39,000 per year. Now that is pretty accurate actually based on everything that I've run through with this property owner. That's about what it's making. So interesting about that 39 figure is it's actually higher than a lot of properties over here that have a better value. So this one at $280 is one of the lowest priced units on this mountainside. It's probably right now the lowest priced, but it's a blank canvas. It's something that you can take from its baseline all the way up to incredible number ⁓ the right amenities, with the right renovation, with the right strategy. So ⁓ recommendation for what you're going to do here I'm going to go through this kind of quickly, but my recommendation for what you're going to do is based on some comps that I'm going to get into in the next part. Number one, this unit needs new windows. That's about $10,000. It needs new doors, sliding glass doors, regular doors, Estimate around $7,000 for doors. It could use some new outlets and switches. So estimate another $2,000 for outlets and switches. It could definitely use a privacy wall because the primary suite is upstairs in an open loft. So there's not really a whole lot of privacy there. That's going to be another $3,000. You're going to need new flooring for 1200 square feet, budget around $12 to $15,000. You're going to need a paint job for this amount of space, budget $8 to $10,000 for that. you're going to need all new furniture because the furniture that's in here is not exactly what we're going for. So budget about $29,000 for new furniture. Now that's top end, top of line, high end kind of furniture for $29 grand for a three bedroom, two and a half bath house. Budgeted new showers, 5k. New bath vanities, $3,000. New toilets around $2,000. New kitchen, $14,000. a couple arcade games, budget $2,000 for that. A bunk bed with a slide, so the custom made bunk bed, that's another $3,000. Some of that fake grass and a neon sign branding your space, that's another $1,000. A shuffle board, the kind that has the sand in the butcher block, probably factor like $3 grand for that. And then stonework accent on the walls. budget like $15,000 to make a nice impression. So we're going to compare this one at $280 to another property, a subject property as an after renovation value. Now that one is top of the market. It's $600,000. That's what they're asking for. I think that it's worth around $500,000. Now I am a Real Estate Broker. So that's a broker's opinion of value, which carries a little weight in this area. It's not an appraisal, but it's like good enough for a short sale. Anyhow, I think that property would sell for around $500,000. It's 251 Highpass and I've got some video footage of it which we'll roll through in the YouTube version of this. That house is incredible. They put top of the line appliances, furniture, decor, everything into it they started with like a designer from Norway. in order to get that authentic Scandinavian look. And they just did such a nice job with this house. But in reality, it's the same square footage, the same layout, the same plumbing, the same community as this one is. So what we're looking at between this one that's currently for sale for $280 and that one that's probably going to sell for $500 someday, if it ever does sell, is a $220,000 difference. So the renovation budget that I just mentioned for 217 Cross country is $120,000. So that puts you all in at $400,000 with an after renovated value similar to that one of $500,000. So just strictly as a flip, this seems like a really good opportunity. Next, I'm actually going to get into some numbers on rental revenues. So I looked at AirDNA and AirDNA actually puts this house in the top 25 % of income earners on this mountain because it made $39,000 gross. It was out of, I want to say 120 houses in this neighborhood. It was number like 27. Now above it, or several other properties that are the same size, same layout, same number of beds and bedrooms. And yet those ones are much, much nicer and they all have access to the same community amenities. So we really are kind of comparing apples to apples here, or at least the potential to make apples to apples comparisons. So the first one that I'm going to compare to, and I'll do a screen share later so that we can, so that you can see what I'm talking about, but this one's called Mountaintop Family Paradise with Hot Tub and Game Room. AirDNA puts this one at $133,000 annually. So for this to make $11,000 to $12,000 per month, what really does it have going for it? Well, everything that I just mentioned in that renovation budget plus It has a private hot tub, which putting a private hot tub in a town home community where all exterior maintenance is covered is going to be a little pricey. I would budget that at another $15 to $20,000 in this case. That private hot tub though, is a standout amenity. That's something that's going to make that property perform significantly better. The other thing that it has is it's got a little more square footage. There's instead of a crawlspace there's a basement that's finished. It's a walkout and that goes to the hot tub. So that one has around 800 square feet more because of that basement space. That's where they put their game room. They didn't put a fourth bedroom there and they put their hot tub outside that back door. So this house is not exactly comparable but it does tell you what it would take to get to $133,000 a year in revenue. The one I really want to compare it to is this other one called the Camelback. Game room, near water parks and hiking. AirDNA puts this one at $74,000 annually. This is the comp that we're actually going to use for what kind of income we can project from this property if the same renovations are put into it. Now that one does have a stone accent wall, which I did budget for. It also has a shuffleboard, which I did budget for. And this one does not have a private hot tub. It's just the community hot tub, which is indoors, as well as the community indoor pool, as well as get this, a sauna, a fitness center. That's a gym with weights. So it's like hotel quality and an indoor basketball, racquetball court. The stuff is incredible. So if we can get. this house similar to that one with this renovation budget, then what you're looking at is a really, really good cash flow or flip opportunity. Now, what I've recognized is the secret sauce for selling real estate out here is to have the following things in common. And this is what the most number of investors are looking for right now. They're looking for a property that has vaulted ceilings. that has income history, that comes completely furnished. and is valued at five times the revenue or less. So if a property is put up for sale for $450,000 and it shows income history of $90,000, the 20 % figure is met. If the house is being sold fully furnished with rental history, then those investors are willing to spend over appraisal value for it. Now, if that $450,000 property is only 1200 square feet, an appraiser will not value it at $450,000. It'll probably be valued closer to $400,000. But investors are willing to pay a premium to pay an extra $50,000 over appraisal value simply because it has rental history and it comes furnished. Now, why is that? It's actually because of the short-term rental loophole. And it's got a lot of people who aren't traditional investors looking at estate as an investment opportunity because of the tax strategy. These are high W-2 earners that are just looking for a hands-off way to invest in something that can save them $20, $30,000 a year through depreciation. So those investors are not your typical investors. Sometimes they're not underwriting the deal the way you would expect. They're not running the numbers. They're not depreciating assets and calling it an actual expense. They're looking at it as a tax savings. One of my clients told me that if he bought a property last year in 2025, that he'd save $80,000 in taxes. That is extraordinary. $80,000 in taxes for buying a $400,000 house? and you still have the property that's worth $400,000, that just explodes the value. And a traditional real estate investor that doesn't take advantage of this loophole is not really able or willing to make a purchase at those kinds of numbers. So that's why it's the secret sauce. That's why it's the recipe that so many people are trying to get. That's why it's the thing that I'm recommending you turn this into. So Robbie, what I'm saying is With $150,000, you could purchase this property for $280 with a 10 % or 90 % loan to value ratio conventional second home loan. You'd be looking at $120,000 more in renovations and improvements. And then you'd have a property that's worth around $500,000. Now, if you can get it to appraise at $500,000, then you can pull out 80 % of that value, which is 400,000. which is also what you put into it. So it doesn't take a genius to recognize that the renovation budget of $120,000, your 10 % down payment of $28,000, and then a few closing costs brings you in right around $150,000. So the money that you're putting into this is actually what you got out of that settlement. And now you're actually able to refinance out $400K, which is the total that you have into it between your purchase price, and your renovations. So you get the $150,000 back from what you initially invested minus some holding costs. And I don't know how exactly, how long it's going to take for you to do a renovation like this. I would say probably three months. But if you the property, fix it up in three months and then it up for rent and you're able to demonstrate that this property can cashflow at $80,000 per year, then selling it for $500,000 actually will not be that hard because on this mountain, a lot of people are looking for investment properties. where they can just cover their expenses. So let's get into a couple of those expenses. If you do get a DSCR loan, which is around an 8 % interest rate on a $400,000 principle by refinancing the property and getting it to appraise at $500,000, then your mortgage payment will be around $3,480 per month. Now we have to also add onto that a $440 per month for HOA fees because this is an exterior maintenance kind of community. Their fees are relatively high because of all those amenities that we talked about Down the hill. But that $3,480, that's your principal, your interest, your insurance. I'm estimating around $1,400 a year in insurance and over $5,000 a year in taxes. So you are looking at a holding cost after renovation of around $3,500 a month. Now, if the property is making between $70,000 and $80,000, then you're bringing home around $6,500 gross. So That leaves you with around $2,500 a month in income to cover your electric bill, cleaning the house between renters and repairs. So Robbie, what you see is just an example of the opportunity to purchase something at its before renovation value. That's still doing actually okay. If you bought a $280,000 investment property and didn't do anything to it and you managed it the way I have, and you make $40,000 a year on that property, you're going to cover your costs. And you've got a valued property that will go up in value over time. But I'm not suggesting that you purchase a bottom of the barrel kind of property and just manage it as well as possible. I'm actually suggesting that you purchase a property like this and then make it an extraordinary property. The kind of place that you can be proud of, the kind of place that renters are going to want to go to. I want to see your calendar for winter booked up in the fall. And I want to see your calendar for the spring booked up in the winter. You should be three months ahead on a property this nice, this in demand. That property that we were talking about that made $133,000 per year, AirDNA has it listed with 347 nights available. So over the next year, they've only got a handful of reservations, which is not that unusual in this marketplace. We're going into summer and people are booking the single-family homes a little bit more than they are the townhomes, but... this house if it's actually made the kind of money that we're estimating. Will be just fine. Because it's a whole year strategy. It's not something that you have to clear every single month in order to make money with it. So this is the kind of deal that would appeal to somebody with construction, renovation and maintenance experience like yourself, Robbie. Being that you are a super, being that you have money that you just decided that you want to invest, that puts you in a unique position with ⁓ a experience that you can move forward with. ⁓ And not comes with that kind of background. Not everybody comes with that kind of experience. A lot of folks that are hearing about this podcast are really just, you know, they're just in their first property right now and they want to get some experience with it and they don't know what kind of renovations to make. To you, I say, send me an email. I'd love to have a conversation. This podcast is also being listened to by other property managers, people who are looking at advising their clients on kind of amenities that they can add into their properties so they can get a better return on investment on the amenity than they are on the property. Because there are some things that you can spend $10,000 on and you'll make an extra $10,000 per year. That's a one year ROI. there are investment properties out there that already have that whole thing put together for them. But this house with that renovation would be worth $500,000. This house is only for sale for $280,000 right now. And there's a whole bunch more like it. If you're thinking that this is getting sold or you're listening to this podcast three weeks later, the house is probably still in the market. So look it up, 217 Cross Country. But even if it's not, I'd love to help you find another one of the units in here because they're all practically the same. Which is the number one issue in Camelback that you should be aware of is that there's a ton of three-bedroom inventory and it is a challenge to compete with other three bedrooms when you are a three-bedroom and the only thing that you can improve and change is the interior. We've just gone through an example of how that's manageable and how you can compete other people are not willing to go to that level. And between the nicest and the worst properties, your income goes up exponentially. And you'll see that if you look through AirDNA as well. just when you look through Air DNA, recognize that houses like 251 Highpass are not being professionally managed by somebody who is just trying to make the most money from the property. There are some that are very nice do very poorly when it comes to revenue. And that's just because of the revenue management strategy. It's not necessarily because of them the most potential out of that property. I'm sure that makes sense. So, These are the kind of challenges that no one talks about when they sell the dream of easy passive income, but they're exactly the problems that make or break your operation. If you've got a situation you want to share, then please email me info @ galvanizedmanagement.com. Your problem might be the next one we break down and chances are you'll help a lot of other hosts in the process too. If this episode helped you, then share it with another host who's in the trenches. like and subscribe too so that we can organically reach more people. That's how we make this industry better. I'd also love to see you follow on TikTok at Galvanized Investments and Facebook and YouTube at Galvanized Management. Until next time, stay steady, keep learning, and keep building something real. This is Short Term Rental Problems and Solutions.