Short-Term Rental Opportunities with Airbnb
John Larson and the Real Estate Cowboys talk passive income real estate investing.
Hear new episodes every Sunday morning at 8 a.m. The Cowboys invited David Le Roux of Cash Flow Street on the show to talk about the growing short-term rental market, Airbnb, and how you can earn passive income in this exploding vertical.
Keep the #CowboyCoffee hot while listening to John, and the Cowboys talk about how to #BeACowboy and earn passive income in real estate.
David Leroux is a real estate investor focusing exclusively on identifying high returns Airbnb properties. Born and raised in France, he was trained as an engineer and decided to invest in real estate when he was 25. He now owns 12 properties in 5 different parts of the world and quickly received the “Super Host” status on Airbnb. David’s purpose is to teach people how to accelerate their path to financial freedom using Airbnb properties and retire in less than 3 years.
Announcer: Have you thought about becoming financially free through real estate investing, but don’t have the time or knowledge to get started? Welcome to the Real Estate Cowboys podcast. Each week we discuss passive income investment opportunities in the red-hot Texas market. John Larson and the Real Estate Cowboys will show you how to leverage their team to build wealth in real estate through passive investment opportunities. And now here’s John.
John Larson: Hi, we’re back with another edition of the Real Estate Cowboys, I’m your host John Larson. This week we have a special guest on the show. His name is David Leroux. He is an investor from France. I believe he currently resides in San Francisco. He focuses primarily on short-term rentals in short-term rentals, specifically with Airbnb. He owns a company called Cash Flow Street where he educates investors on opportunities with short-term rentals through Airbnb and definitely comes with a wealth of knowledge regarding that type of investment model. The reason I’m having him on the show is I myself am interested in this type of investment, one, and I do believe that there’s great opportunities in some of the major cities here in Texas like Dallas and Boston for short-term rental opportunities. But I’ve also received interest from my own investors at American Real Estate Investments, and also my friends and family have passed me quite a bit about opportunities on the short-term rental side.
John Larson: I now reside in Dallas. And so many people here nationally and worldwide can see that there’s a lot of jobs moving into the Dallas market. And also there’s a lot of sporting events, just events in general that are being held in the Dallas area and other major cities here in Texas. The Super Bowl was just held in Houston last year. Um, you know, a portion of the men’s NCAA basketball tournament was held at the American Airlines Center in downtown Dallas just earlier this year. AT&T Stadium in Arlington is host to many sporting events. Um, many college football games are played there. Obviously a lot of pro games. The Dallas Cowboys are played at the AT&T Stadium and just a lot of events in general are held here. And so you have an opportunity with short-term rentals to not only capture those people that come to Dallas for sporting events or any other type of events in the Dallas area, of which there’s a plethora of them. Um, but you also have a booming economy and a very diverse county where there’s a lot of business travel into the Dallas area. The Austin area, the Houston area, and the San Antonio area. And so that drives a lot of demand for short-term rentals as well. And so David is the expert on Airbnbs and he talks a lot about what to look for with Airbnb’s, how do you know your area, where you’re looking to invest in a short-term rental. How do you know that you’re even able to operate in an Airbnb there, he sheds some light on that. He talks about how to manage the property remotely. So for my friends and family out of Detroit area who have asked me about short-term rental opportunities in Dallas, um, they’ve asked me, how do I manage it? Can you manage it for me? Right now, my property management solution is not set up for short-term rentals, because as we’ll talk about in the interview, there’s a level of concierge service that needs to be added to professionally managing an Airbnb. There’s little bit of a hospitality take when it comes to owning and renting and managing an Airbnb business. Um, it’s not really just a situation where we place a tenant and then you can hand it off to a management company to just make sure rent is collected and fix any maintenance issues. There’s a little bit more turnover involved. Also these people are renting this property maybe for a vacation property and expect a little bit more care. You know, what, if they have to check in early with they have to check out later, whoever it may be.
John Larson: Um, you know, so you have to have a little extra service when it comes to professionally managing an Airbnb. Like, I’ve been in some Airbnbs where, you know, it wasn’t the best experience and I just think it’s because of the host or the owner just wasn’t looking at it as a business necessarily. But I do believe David, and I do believe others that are doing this model, there is money to be made if you run the property and the opportunity professionally in the way it should be ran. And so before we get into the interview with David, I want to talk about some stats that I found on the Texas market in the major cities here in Texas regarding Airbnb and short-term rentals.
John Larson: And so Airbnb usage continues to be on the up and up in Dallas. According to AirDNA, booked listings increased by 34 percent in 2017 in the Dallas market. So there’s definitely a lot of growth going on here in Texas and Dallas and Austin specifically. Um, Austin, no surprise to me, was by far the state’s most lucrative market for Airbnb hosts. Book listings or listings grew by 23 percent in 2017. And so the city has two major boost each year and that comes from South by Southwest, and Austin city limits music festival. And this past year in 2017, the Austin city limits music festival led to a Texas record, 7,332 bookings through Airbnb. And so that’s just unbelievable. So you can see right now, Austin’s definitely leading the charge when it comes to Airbnb. And short-term rental opportunities in the Texas market will as well. The one thing that concerns me about Austin is the rising prices. Lots of transplants coming from the California market who were used to spending a million dollars on a home, right?
John Larson: Are now moving into the Austin market and you’re just seeing the population growth, increased demand for housing and the person that is moving into the Austin market is already trained to expect higher values when purchasing a home. So I think they look at a $300, $350, $400,000 price tag for the same type of home that they’d be paying a million or more for in the California market. And they look at it as almost laughable. Um, which is why I think that this contributes to the rapid rising prices in the Austin market. Increase in demand of course, but also a buyer that is trained to expect higher prices. And is not shocked by higher prices.
John Larson: Now let’s go into Houston. Houston’s also a market that is experiencing a lot of rapid growth, job growth, population growth. And now also short-term rental demand growth. And so Houston’s market grew by 44%, and that was in 2017. And they feel that a lot of that was bolstered by strong numbers during the Super Bowl that was played in February last year. Um, so over the last half of 2017 Houston booked listings grew by 33 percent and Dallas’s grew by 36 percent. So a lot of growth in these markets that I’ve mentioned. And another stat that I saw was over the course of 2017, Dallas, Fort Worth averaged, 1,772 book listings per month, while Austin definitely led the charge with 5,189 per month. And Houston averaged 2,879 per month. Um, so a lot of bookings in these major cities here in America. So if you are considering short-term rental opportunities, I do think that Texas and some of the major cities in Texas, are great opportunities for short-term rentals. Like I said, it’s because of increased growth in market, increase in jobs, very diverse economy, so you have a lot of business travelers coming into these markets that are looking for short-term rental opportunities.
John Larson: I can say when I travel around the country, mainly my first go to is to look for Airbnb opportunities before I look at hotel opportunities. I just like Airbnb, I like ease of it and I believe that it can be more affordable in most cases and I think you get a lot more for your dollar, and if you’re renting from a good host that knows what they’re doing and knows how to professionally run an Airbnb business, your stay will be very pleasurable. And so, let’s talk a little bit about our guest that we have on the show coming up. So David is a real estate investor focusing exclusively on identifying high returns through Airbnb properties. He was born and raised in France and trained as an engineer and decided to invest in real estate when he was 25. So an early age. While he kept his nine to five job, he searched investment properties that can be rented on Airbnb as they had a much higher profitability than other investment properties. He now owns 12 properties in five different parts of the world. And quickly received the super host status on Airbnb. After reaching financial freedom, he decided to coach hundreds of students, who experienced a similar success. In 2017, he created Cash Flow Street, and made his teachings available globally on a leading learning platform, Teachable. By launching the first step by step, easy to follow method to buy Airbnb investment properties. David’s purpose is to teach people how to celebrate their path to financial freedom using Airbnb properties and retire in less than three years.
John Larson: So I’m very excited to have David on the show to talk about these great opportunities. But first let’s take a quick commercial break. And when we get back to you, we’ll have David joining us on the Real Estate Cowboys. Alright David, thank you so much for joining us on the Real Estate Cowboys. How are you doing today?
David Le Roux: Great. Thank you, John. Doing great.
John Larson: So I am actually pretty fascinated by the growth that I’ve seen with Airbnb’s in Texas and some of the major Metros here in Texas and from the research that I’ve done, it seems that Austin is definitely leading the charge in the Texas area, Texas market for Airbnb opportunities. And I think a lot of that has to do with the fact we have a lot of major sporting events, music festivals, just major events in general that seem to be coming into the Dallas Fort Worth area, the Houston area, the Austin area. Like the Super Bowl, for example, was just held in Houston. We have Austin City Limits and South by Southwest, that draws a lot of people into the Austin market. Plus it’s a college town with the University of Texas. So athletic events are going on there quite frequently. So, David, I have a few questions for you. Let’s start off; number one would be where can you purchase an Airbnb property that can be operated legally?
David Le Roux: A great question because we hear a lot about Airbnb being banned here, being banned there, so people can get worried, and when you have an investor that wants to buy an Airbnb or so-called vacation rental or short-term rentals you need to be sure that you buy this property in a place where you can operate it 365 days a year. A lot of cities, when it’s about a single family home, or traditional residential, like most of the condos in big cities, San Francisco or Manhattan and also in other metropolitan cities in the US, it’s very important to check with your city whether it is 30 days, 60, 90 days, or if it’s okay to do it all year long. This being said, typically for large cities, you will have some cap and it’s very, very important to buy within those cities in a zoning that allows a long-term Airbnb; meaning where you can rent for 365 days, could be one night, two nights at a time, but you can rent it for the entire year. And I do teach that also in detail in the course, but the main thing is to identify the right zoning in those cities where you can legally rent an Airbnb. And it’s a secret that many, many investors don’t know about that, even though it may be forbidden, let’s say within the city to do an Airbnb and that’s what you’ll read in the news, there are many niches in those cities. Even in Austin, in Houston, even in San Francisco where you have a non- residential types of zoning that would allow you to do an Airbnb all year long. And a lot of the restrictions, where it’s so-called illegal is when it is, let’s say, traditional single family home. That’s where there is a challenge to do a legal Airbnb, so always focus in the zoning where it is a single family home or where you can actually do this Airbnb anytime during the year.
John Larson: So you’re saying that you could potentially run into issues with a single family, residential property, um, if you’re doing an Airbnb within some of these major Metros, but if it’s maybe an apartment or condo, are you saying that there’s an easier opportunity?
David Le Roux: Yes. So this gives you a tangible example. You can buy a condo within a resort. And resorts are not zoned as a single family home and no one from the city can tell you that you can’t operate as an Airbnb, meaning as a resort within a resort because that’s the way this zone. If you want a single family home, a three bedroom, two bedroom, in Austin, or some cities where you have regulations, that’s going to be a big issue. If you buy an Airbnb within a resort, that’s going to be a definitely to your advantage. This being said, always, always check the rules of the resort and you buy a condo within a resort, there are also rules just within that resort. Some do allow Airbnb and some don’t, and that’s something we can check in the CC and R document that would list whether you can have an Airbnb operation or not. And that’s something that you need to do on the resorts of all hotel, where you can buy. You need to do this homework.
John Larson: And so I’m sure that you might also want to check if there’s any or anything like that, homeowners associations that are involved because I’m sure that they may have some rules against an Airbnb as well.
David Le Roux: Yes, that’s something you check in the document. The CCNR whether it allows you or not. And to add one thing, it may not be written in ire. In some cases it is relatively new, so there may not be something that is stated about having an Airbnb operation and that’s something where you need to, where you have a real estate lawyer, or you could hire one on just and sell.com website where you hire a real estate lawyer to read the document and see what it would take for them to change this type of rules within the HOA. For example, if 80 percent of the people need to be present to vote against, that’s going to be very difficult to implement because they have, let’s say, 30 percent of the people in the resort that are present to vote. So, in this case, I would still invest in this type of resort. If nothing’s been included yet, to change the rules would be extremely complicated.
John Larson: Got It. Well, so I travel around the country quite a bit, just for my business. I operate in actually four major cities across America. So I travel quite a bit and usually my go-to is, I always try and check what type of Airbnb are available first, just because honestly it’s just a better feeling when I’m staying in an Airbnb, I feel like more like I’m in a home, then I’m staying in a hotel, and some Airbnb hosts do a very, very excellent job of accommodating their guests. I’ve been in some that aren’t so good, but the majority of the properties that I’ve been in where the hosts really take it seriously, I’ve had a really great experience. Now, one question that I have; I do longterm single-family rentals. I’m mainly, and the reason why I haven’t gotten into Airbnbs just yet because trust me, I’ve been approached by many of my investors about this model. I’ve actually even been approached by my family and friends who have been interested in possibly doing an Airbnb in an area like Dallas where I now reside. I’m originally from Detroit and now I live in Dallas and you know, there’s so much job growth here and there’s so much, so many people that stay, you know, short-term here in the Dallas area for their job, or come in for a sporting event, which like I said, a lot of sporting events and events, in general, have been going on in the Dallas area. So many people approach me about this. They asked me if I have the opportunity, but right now my management solution is not really set up for short-term rentals. We’re going to eventually work to that. But for right now we’re kind of set up for that long-term rental scenario. So my question would be, how can you manage Airbnb properties remotely? Let’s say, for instance, my family, they live in Michigan, they look at markets like a Dallas or Austin here in Texas or maybe even Chicago for an Airbnb opportunity. How can they manage it remotely?
David Le Roux: Good question. And in fact, whether it is in your hometown or remote, it should be the same model. So that the host or the property owner of the Airbnb don’t spend too much time themselves to do all of the tasks and can focus all of their time on the next property that they want to buy. When it is an Airbnb, you are in the hospitality business, and the hospitality business requires a different team to do the cleaning, the laundry and take care of some issues with guests. That will happen all the time, as it could be a plumbing issue or some problem with the lock and you need to have someone also that can communicate with the guests. It’s very important to have someone that can answer very quickly, you have any, any concern, any questions that they would often ask, can I check in a bit earlier, a bit later. So it’s very important to have a team that has one person that can communicate with them–does not have to be on site–and if you have multiple Airbnbs like I do, I hire someone to answer all of my properties and they’re paid to answer very quickly and on top of it the answer, the inquiry. On Airbnb, you have inquiries, sometimes they book the right thing, but you have to answer very, very fast or they choose another property. So I incentivize them on answering in less than 30 minutes. And virtual assistants, you can hire them on Upwork.com or other websites where you can hire all those virtual assistants, test them. If it works, great. If it doesn’t work out, you can change it very easily so you have one person that is really the face of the property to answer all of those questions. And then you need to have a plumber and handyman. That is ready to go at any time. Always have duplicates because when you have an issue in an apartment, you can’t have the plumber say, well I can’t go today, but I can go next week. This is just not acceptable. So you need to have a backup. And some property, I have three plumbers that are lined up just in case the first and the second cannot go. Then you need to have a handyman, could be a like a property I have in Hawaii. I had an issue with a fan. They need to go there to fix it very quickly because it’s warm over there, so they need to be very responsive. So always have a handyman as well. And the cleaning services. The cleaning services are very important and need to do a good job. Otherwise, your reviews are going to be really impacted for obvious reasons. Guests are extremely sensitive to how clean the place is. And there are standards that are set by hotels. Um, most of the hotels they’re very clean and it needs to be the same for the cleaning team that you hire and have them also do the laundry. So to summarize, have a very responsive cleaning team that is familiar with short-term rentals, they can go in very quickly, sometimes check in, check out that same day. So they have to be there that day and clean within those four hours. Um, check in at 11, check out at 3:00 PM. So that’s four hours to clean the place. And have a handyman and a plumber, and always duplicate and make sure you have someone to answer all emails. So four people.
John Larson: Okay, so it’s going to be a four-person job pretty much to really professionally run one of these properties.
David Le Roux: Yeah. And there is actually one member I did not mention there, a traditional property manager. And there are many services out there that are happy to take 20, 30% at times. Um, but I would advise not to use a property manager if you have multiple properties, you can hire someone like a virtual assistant like I mentioned. And if you only have one property you can train the cleaning service that you hire, especially to be the face that answer the emails from the guests because they’re the ones that gets a lot of questions like, can I just can come in. And that’s what I’ve done at the beginning for some properties where the cleaning service will be trained to answer Airbnb emails and it worked pretty well until the point where too many properties and I had to scale the operations. Be cautious about property manager. You may think you get more peace of mind, but this will cost you a lot of money. and if you buy in cities, like in Austin, in Houston, it’s a hot city for Airbnb, but it’s expensive, so you need to make sure that as much as the money, it stays in your pocket. Don’t give it away.
John Larson: Of course. Yeah, because I mean, it really only makes sense to do these short-term rentals to get a higher value on your rental price for these properties to increase the cash flow and increase your return. But if you’re adding in additional expense, then you’re kind of just evening out, where you want to keep as much money in your pocket as possible, like you said. Um, yeah. I mean, uh, I like how you said that you almost kind of have to add that extra concierge service as well. Um, because like I said, I’ve been to some Airbnb that I didn’t have the best experience, um, just because the host or the owner, they just weren’t operating it properly. Maybe it was a situation where it was obviously their primary residence, maybe they were out of town for a period of time and just decided to throw their property up on Airbnb just because, you know, an event was coming into their city or whatever it may be. And so, you know, the laundry wasn’t done. There were no towels available. Things of that nature, so that there was some experiences that I had that were kind of unpleasant. But the majority of the time that I rent an Airbnb when I go to Austin or Houston or Kansas City, it’s been a very pleasurable experience with a host that actually know what they’re doing and are running it truly as a business.
David Le Roux: And Airbnb is really scaling up. Their goal is to go more and more into the hotel business. They launched Airbnb Plus. And some properties you’re really going to have to have like, soap and shampoo and linens, very stand out types of products. And the self-check-inn also is becoming more and more popular, that allows to support business ready so people can have the hotel experience yet Airbnb control. And the standards are getting higher and higher. But also, as I mentioned, the segmentation at Airbnb is doing the type of properties with Airbnb Plus, Superhost, those help to get kind of quality control, the experience that the guests would have in an Airbnb.
John Larson: Gotcha. Okay. So one thing that I’m thinking about as well, how would you find the most profitable properties in the major markets across America or outside of America? Right? Because Airbnb is worldwide. How do you find the most profitable properties, David?
David Le Roux: Yes, it’s very attractive, Airbnb. What I see for my students is three times more profitable than a regular property. However, there are also Airbnb properties you can buy where you’re going to lose money. A lot of money. So be very, very careful to assess those properties correctly. When I started to buy Airbnb properties, unfortunately, I couldn’t ask a Realtor, where is the best Airbnb properties? Because they don’t follow the same rules as a traditional real estate investment. It’s not necessarily about square footage, but more about how many people can stay there. Is the place cute? How close is it to events or business center, and those are going to be different requirements and you need to, as an investor, trust this into the right revenue assessment and the right cost assessment. And after all, I always say, real estate is just pluses and minuses. You just need to make sure that you have the right pluses and minuses, so to find the most profitable one you need to have a very accurate revenue and cost assessor just for Airbnb. So we go into this in great detail to address every single item, making sure that you don’t avoid any.
David Le Roux: I’ll give you an example. The repair budget you need to plug in when you’re assessing Airbnb, you need to have a budget for problems that are going to happen. You may need to fix, as I mentioned, a fan for me last week or maybe a lock that doesn’t work, or plumbing, so you need to have this factored in. Also, the taxes that you will pay as a short-term investment. The HOA that you will pay, the electricity, the internet, and so on, but on the revenues for obvious reasons, when you calculate the profitability, as important as the cost assessment. And the great thing about Airbnb is that there’s a lot of data points. Think about it. A lot of people that, uh, check in and check out of an Airbnb and that’s always recorded on the Airbnb platform. On top of it you have short-term rentals, where you can get data points like VRBO, Homeaway, and if you buy in the resort, as I suggested, you can also check what revenue you can get within that resort. Always discount it by 20 percent if it’s in a resort because Airbnb travelers always are looking for some kind of discount, compared to if they’re staying in a resort. So to answer your question, to assess the most profitable one, make sure you have the right profit system, a final analysis put in place and make sure you assess both the cost and the revenue accurately. And it’s actually a great thing about Airbnb because we can check the revenue. You can make these multiple sources, Airbnb and VRBO and there’s a great site that collects the Airbnb data called AirDNA and Air DNA compiles the Airbnb data for you for specific zip code, a specific city. It helps you to jumpstart and um, you can also check on the resort website, so you can really see what is the minimum revenue you’re going to have, what is the maximum revenue, and have a good idea of the profit that you can make.
David Le Roux: Now, to choose the most profitable one, and where I gravitate for my own investment and the investment of my students, is typically where there is some kind of regulations of Airbnb. And that may sound counterintuitive, but it’s all about supply and demand. If you buy a place where the supply is low, but the demand is extremely high, it’s going to be great for you as an investor. So if Airbnb is allowed and everybody can do it, what’s going to happen to the supply; it’s going to be very, very high and the price is not going to be that high. So if you can find the niches I mentioned- the niche where it is legal because it is a different types of zoning , like a commercial zoning, but it is forbidden all around because it’s a single family home, this is great for you for Airbnb. Always recap the supplies of hotels in the regions. And that’s why I typically stay away from Las Vegas because there’s just so many hotels. It’s very high, so those are some guidelines to find the niches in cities and, as we always say in real estate, you make money when you buy, so always negotiate as low as possible. Once you find a property and buy them as low as possible. Even in San Francisco, I wouldn’t buy it here because everything is extremely high, but there are many markets that are not as crazy as San Francisco in the U.S.
John Larson: That’s absolutely true. So obviously I’m a firm believer in that as well with all my investment opportunities. I always focus on markets where, you know, it’s not overly saturated, right? Um, you know, well, what I’m looking for is, little opportunities, right? Like, like Dallas for example, there’s not a ton of inventory available on market which makes it great for an investment property, right? We see rising prices due to the fact that there’s scarcity in terms of available homes on the market. That also creates rental prices to increase and it makes the opportunity, in my opinion, a lot more lucrative because of the fact that not everybody can get their hands on it. Right? So I like what you’re saying there. You obviously do not want to invest in an Airbnb in an area like Las Vegas where there’s a hotel or, you know, on every corner, right? It doesn’t necessarily make sense. Um, now I’m going to talk a little bit about what I do. I actually invest in short-term rentals as well down in Belize. And we selected Belize for a lot of different reasons, but it’s very close proximity to DFW, Houston and a lot of the markets that I operate in. So down in Belize, we have short-term rentals that we actually list through VRBO, and we’ve had a very, very good response through that platform. Um, and, and are able to rent our properties very consistently. We actually also do private island developments that are rented out months or almost a year in advance, but we do run into some situations in Belize where there’s a low season, um, and it’s typically going to be in the summer months. Um, and going into September. Um, do you have any, I guess, tricks or secrets on how to generate revenue during the low season?
David Le Roux: Yeah, that’s the reality for most, Airbnb is going to be the high season and the low season. And the key is that the low season doesn’t go too long. When it’s a ski resort, I typically stay away because there’s no snow. No one can go there. The great thing about Belize is the beautiful water is there all year long. So it’s more about how to attract people in the low season and it starts first and foremost by being better than your competition. And the number one thing that people will catch on an Airbnb listing are the photos. And some of them don’t even read the description. And so how many people are going to be there and they look at the best photos and that’s where they’re going to go. So always make sure that you have outstanding photos. Some of my properties, I hire three photographs, so I have three people that they come and they just take photos and I select the best one and that just makes my property so much better than the neighbor that may have taken photos with his iPhone and his place maybe even has a swimming pool, much better than mine from a real estate standpoint, but not something I’d be interested in. So that’s how you have people that gravitate toward your listing. And then we can definitely advertise your listing more on social media. And we see this more and more on Instagram, which is again, very photocentric and uh, people are very visual and you could get traction, you can get more people coming to your Airbnb listing by simply having the link in your bio on Instagram. And if you don’t have enough booking just doing it on Airbnb and it’s totally alright to have multiple platforms and platforms like VRBO. They’re easy to set up, very similar to Airbnb, and you can synchronize the calendar. They have circle icons and it is nice if you have a booking of the VRBO, it will block the dates on Airbnb. And see how it works, how much increase in bookings you get. And if you don’t have enough, you can always add like Booking.com. And if you have too many of those sites and you really want to boost the low season, you can always have a property management software to allow you to manage all of those sites. But if you have just two or three, Airbnb, VRBO and Booking.com, you can still do it without paying an additional commission to property management software and that will definitely helps you to boost the low season.
John Larson: Gotcha. Yeah. And I agree with you 100 percent. The way that you present the property is very, very important. And I find myself doing the same thing. I don’t even necessarily look at the reviews, I don’t look at the description, you know, I’m looking at a property, it’s definitely visual first. I’m looking at what’s the nicest property I can get for the most affordable, you know, dollar. Uh, I obviously don’t want to overspend, but typically, I mean with an Airbnb or rental or anything like that, if it’s extremely low cost, it might not fit my taste. But I’m, you know, I’m looking at good solid photos, nice property, um, and I’m looking for a good cost and if basically the property checks all those boxes and I’m definitely apt to select that one. This kinda goes into a good question here. How do you determine the pricing for your Airbnb? Because I do see some that I would think maybe that’s a little overpriced, or maybe, what do you say to the investor that owns an Airbnb that you know is maybe pricing their selves too low? How do you hit that accurate price on the short-term rental side?
David Le Roux: Yeah, it’s so important. After all the efforts to buy a place, uh, if you don’t price it right all of those so benefits vanish. And you can see that against the Airbnb investor, you have hotels. And hotels, like airlines, and the airline industry, they change their price on a daily basis; sometimes on an hourly basis. So you need to have the software and then go with them. That can change the price to make sure that you don’t leave money on the table and that you don’t have, on the other hand, too many nights that don’t have any booking. The one that I use, it’s called Beyond Pricing, they also have Wheelhouse, PriceLabs, so there are multiple ones. And those software, all are account based and you can register very easily. It links to your Airbnb account and what it does is that you set them. I can be on pricing at the best price. That best price is going to be set based on your assessment as to what this best price should be. And don’t try to be perfectly right or wrong. Just set the base price based on some initial market research like what is a similar property renting for. Or if you rent it for some time try to get your average for the last two months and that’s your base price. And then the software is gonna do the price adjustment on the databases for you based on multiple factors like the sport event or music events in the area at that time, how much bookings you have the next 30 days, 60 days, 90 days, do you have a night that is by itself between blocks of reservations and the night alone is always more difficult to book, so that one should decrease in the price so it’s going to change the price all the time to make sure that you maximize your bookings and if your best price that is the reference price, the one which that algorithm is working. If that price is not right, you will know very quickly because you get metrics back like for the next 30 days or 90 days, you can see the percentage of bookings and you have some targets there. If it’s below target on the website, let’s say you get less than 50 percent bookings in the next 30 days, then you need to adjust it accordingly and that will allow you to really maximize the profitability. They do take one percent of the revenue, but it is definitely worth it. You get much more revenue if you use them, compared to someone that just have a low season price and the high season price and they don’t touch it for the entire year. That’s a bad pricing policy. So that’s what is really a must, to have a pricing tool. And I don’t care if you use Beyond Pricing, PriceLabs or Wheelhouse, but use one of those three.
John Larson: That’s great advice. Okay, so one more question, David. So this is a Texas show we’re called the Real Estate Cowboys. So we talk a lot about passive income opportunities in real estate. But we also like to talk a lot about the Texas market, and the major Metros, major cities here in Texas. And so everything that I’m seeing from Airbnb is, there’s been an exponential growth in Texas and Dallas, and Austin specifically for Airbnb opportunities. What do you think about the Texas market and let’s say Dallas Fort Worth and Austin specifically for investors who may be interested in going the Airbnb short-term rental route and let’s say DFW and Austin.
David Le Roux: Great markets. And pretty much all large cities in the US are great markets, as long as you find the right zoning. As I mentioned, always pay very, very close attention to the regulations. Try to stay away from single family homes because it may be okay today, but that may change tomorrow. if you’re in a commercial zoning, you know, resort zoning, then you’re protected. Things can gradually change around you, but it’s not going to fundamentally change the rules for your investment. If you rent and sublease, that’s a different story. When you buy, you don’t want to be surprised by any change of rules. I like Austin in particular because of all of the events that are there, and also the business traveler, so don’t forget the business traveler is a significant growth of Airbnb, and the Airbnb press is targeting the hotel types of stay on their platforms, self check-ins and so on are going to drive the growth and definitely a place for business travelers. But be conscious of the market. I know that a lot of people from the Bay Area flew into Austin and pricing has increased significantly in the last few years. So always be cautious and look around the city as well. You don’t necessarily have to buy it right in the downtown. It could be around the city in a place that is more plentiful tourism. So try to check the resorts there where the HOA are Airbnb-friendly, where you can buy a unit for not too much money and uh, and try to plug the numbers as I mentioned, to see whether it’s profitable or not. Each time I have a doubt as to whether I should use the same financial analysis and it tells me yes or no that I should buy it. And that saves me a lot of headache which I can profit from later on. At least I know whether it is a good market, a good house to invest in. And I have assessed markets at times that I thought were good and were not. A best guess. I know that in Austin is a lot of great opportunities. But again, there are many niches you can invest in this and also many that you need to avoid. So I can’t categorize just one big city as good or bad. You’ve got to do your homework and make sure that first and foremost, you comply with the legal aspects with the regulations of the city and when you have those two green lights, then do the financial piece and move fast because there are other sharp rental investors out there that want to get a second piece of this pie, the small pie of Airbnb that, uh, as I mentioned on otherwise three times more profitable than a long-term lease type of property.
John Larson: Gotcha. I appreciate you being on the show so much. A lot of great information here. A lot of things that I learned that I didn’t even know about when it comes to Airbnb investing. So if somebody wants to learn more about how to get started with short-term rentals and specifically with Airbnb, where can they get more information on this? Where can they go work with you and take some of your classes. What’s the best way to get in touch with you?
David Leroux: Yeah. They can go on CashflowStreet.com. And I do have a free workshop there for more information. Some clients wants to work one on one, on a consulting basis. So that’s something I do as well and they can contact me at David@CashFlowStreet.com.
John Larson: Awesome. So CashflowStreet.com or David@CashFlowStreet.com to get directly in touch with you.
David Le Roux: Correct? Yep.
John Larson: All right David, thank you so much for being on the show. A lot of great knowledge here. Hopefully, hey, we could have you back on here again sometime soon.
David Le Roux: That’d be great. Thank you.
John Larson: Thank you.
John Larson: Well that was some really good information you received from David there on short-term rentals and the opportunities that are out there with Airbnb. I really want to thank you again for being on the show and educating the real estate community on these great opportunities to achieve some passive income in another way. So really appreciate him being on and hopefully, everyone listening to the show found the information valuable.
John Larson: If you like what you heard today or if you’re interested in learning more about other passive income real estate opportunities that are available to you, I recommend going to our website RealEstateCowboysDFW.com. There’s a lot of great stuff on the web page for you to access. There is education, there is an opportunity for you to subscribe, to receive weekly updates on exclusive passive income opportunities, whether it be single family rentals in Texas or Missouri, whether it be private lending opportunities that we have on commercial and residential land development, opportunities in Dallas and Houston to the vast markets in America. And also we’ve talked a little bit about bringing up the Airbnb option with short-term rentals. Our vacation rental properties and private islands that we have available in Belize that are actually available for rent on the Airbnb platform.
John Larson: So for anyone listening to this show that’s interested in these opportunities, definitely check out RealEstateCowboysDFW.com. We also have a really cool passive investor quiz that’s on the website, really fun quiz with I think about 10 questions. Based on your answers, it will tell you what type of passive investor you are. Are you a single family rental investor, private lending investor, vacation rental investor? Maybe you’re all three, maybe two or three. Take the quiz and find out and then access the website for more information. You can download our passive income starter kit that will give you more information on all three of those opportunities and very soon you will be able to access and download a copy of my new book, The Passive Income Guy. Very excited for that to come out, so be on the lookout for that book. And once again, great episode of Real Estate Cowboys. This week we learned about some new things. Short-term rentals is something that I myself don’t even know very much about. It was great to have David on the show to explain that opportunity in more detail and things to look out for when investing in short-term rentals. So Real Estate Cowboys community, thanks for another great show. Thanks for tuning in and I’ll be back again next week with some great content.
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