My experience as a AIRBNB Host for 30 days! * I am no expert nor claim to be*
This is just my personal experience!!
One night, I was up on social media like 2am in the morning and I happened to come across an advertisement that said:
“You can make money in the real estate industry without owning any properties.”
My curiosity definitely got the best of me as I proceeded to click on the link.
I believe, it might have been a video, or it might have been a blog.
However, as I started to read the information on it, I noticed he had a course to explain how it’s done. So, I’m always willing to spend money to learn something new and I ended up buying the course without hesitation. I believe it was about maybe $50 to $60 but it’s close to $200 today. I didn’t immediately act on it. After purchasing the course, I think it sat there for maybe 2 or 3 weeks as I was working on a different project. But once I dived into it, I became really intrigued on how the process works.
What the course covers is the topic you may have or not heard of called “Air Bnb Arbitrage.”
What is Air Bnb Arbitrage???
It’s a process in which you can rent out a property. It can be an apartment; it can be a house a condo or townhome. Pretty much something that you do not own, and you rent it for a price higher than what you are leasing it for. So, let’s just say for instance, you found a 2-bedroom apartment for $1599. You put it on a short-term rental site. This can be anything from Airbnb, Vrbo, Furnished Finder and so on. You then you re-rent it only with the intention of making more money than what the balance is left over after you pay the rent.
With utilities it’s at $1799. You put it on Airbnb for $140 a day and you rent it out for 25 days in a month.
So that’s $140 multiplied by 25 which comes up to $3500.
However, with rent and your utilities, you would have to deduct from your earnings. So that’s $1599 for rent, $200 for your utilities, that makes it $1799. Deduct that from your $3500, that comes up to $1701.
So essentially, anything that is left over from your rent and utilities is your profit. It’s your cash flow/passive income. The amount that you can make really varies on the location.
So, after that course, I became really intrigued with this process.
Because 1, it is pretty much a process that can operate on its own without me being physically there.
2. I have constant cash flow coming in with very minimal work to do and very low overhead as well as upfront money. Once I purchased this course, one of the things that I like to do when I’m learning something new is to get different opinions and different scenarios.
I like to learn from different people because what one person may teach me may be something different from what another person would teach me. I would have to figure out my way of how I would do it and which works best for me.
I ended up finding another course, actually two but the second course that I took was a lot cheaper. Pretty much the same information however, they did have different ways that they went about the process.
I was able to take something from each one. Once I felt as though I gained enough information is when I started the process of now putting in the work.
The first thing I did was figured out how I would go about structuring this entity because of course, I don’t want to put it in my personal name because I don’t want any personal liability. But also, it’s not personal income. This is a business and I’m going to treat it like a corporation.
I’m going to put it in a corporation name. I just so happened to have a corporation that was sitting for about 6 months which worked out perfectly because it was a very generic name.
Having corporations already filed and ready to go is something that I always recommend for everyone who’s an entrepreneur or plan to be.
I used this company which already had a business bank account set up. But if you don’t have a company with business bank account, EIN etc… you want to make sure you have those and you want to be filed with the secretary of state.
The first thing you want to do is run your numbers.
There’s this site called AirDNA that’ll help you do that.
· You find a location that you like.
· You run the numbers.
FOR EXAMPLE PURPOSES ONLY.
And when I say run the numbers, I’m talking about searching this address to make sure that this is a highly trafficked area that may bring in some good income.
Examples of highly trafficked areas are places like where there is a lot of night life, maybe near some amusement parks or maybe an area with a lot of business professionals come.
Not that I’m interested in Wilmington but just for an example, Wilmington Delaware, is the headquarters for a lot of financial institutions. Discover, Capital One, Chase. And on an average, a lot of the employees that they have come from out of the country. So, this is a highly trafficked corporate business area. It just depends on what your target is. Visiting this site will pretty much give you an example of what you could bring in just based upon data that occurred within the last 12 months. That is one way to research it.
Another way to research it is to look on Airbnb, type in the address of the location that you are interested in and look at the host’s calendars and see how far they’re booked up. Look at their daily rates. There’s a lot of different ways that you can research but you want to do your research before pulling the trigger. Sometimes, the numbers that these companies advertise is not always 100% accurate. And in fact, this site above actually projected that I will make a lot less than what I’m making now. But I still took that chance because I knew the area that I’m in had a lot of health professionals traveling there.
Once you get your numbers & the perfect location, the next thing you want to do is reach out to these properties. Because you’re operating under a business name, one of the most important questions that you’re asking is do they accept corporate lease agreements?
A corporate lease is an agreement between your company and that particular landlord or apartment complex that excludes you personally for any liability. You want to make sure that you’re looking for companies that have set that up because if you’re doing it in your personal name:
· For one, there could be a lot of liabilities that’s involved in that.
· For two, a lot of times you will see people do that because they’re not being 100% honest with that particular apartment complex or landlord which can cause legal action if found out.
And that’s another thing that I don’t recommend. If you want to do things the right way and you want to protect yourself you want to make sure first, that they accept corporate lease agreements. This may cause you to get a ton of no’s eventually until you start to receive your first YES! But you will be operating legally!
Once you get a yes, that doesn’t mean that that’s a green light and that you’re ready to go. The second thing is you want to make sure that they accept the business model. And what that means is you’re not going out and saying
“Hey, can I rent your apartment? I want to put it on Airbnb.”
You’ll be shut down!!!
The reason being is that a lot of these companies are very biased to Airbnb rentals. When you think of Airbnb’s, most think people there are just throwing parties, trashing places, so on and so forth
So, reaching out to apartment complexes and right off the bat saying,
“Do you accept Airbnb?” will more than likely get you denied.
Your company is not an Airbnb company!
Your company is a short-term rental company!
What platform you use doesn’t define who your renters are.
I will say about 75% to 80% of those who came into my Airbnb were professionals coming for work, not vacation. And there is a way for you to screen that. There’s also a way that you to talk to these particular companies and a lot of the courses have a script to help you with that.
Once you find a location that agrees to that, you would want to submit your corporate application. Now when you submit your application the requirements will vary.
· Some companies are going to want you to be in business for 2 years.
· Some companies are going to want you to have 2 years of tax returns.
But there’s a lot of companies that don’t mind if you are a brand-new business. They may just give you a chance.
They may also ask you to personally guarantee the lease which means you put your own social security and other personal information down and if anything happens, it actually comes on you. They may ask you to put an additional security deposit. Everyone would have different guidelines.
Once you find one that aligns with your company, then you go ahead and proceed with the application.
Another thing that is important about the location is making sure that the clients can get in and out without the help of you the apartment complex.
Not every apartment complex is set up for that. You don’t want to be hands on and you don’t to just give out keys to people physically. You want to have a way to where they can check themselves in.
There are some smart locks that a person can get in and out with by typing a code or you manually unlocking from a remote location.
Below is the lockbox I use!
Although here are lock boxes that you can use, what about properties that have a doorman or an apartment building that has an elevator that requires a code. Some have call boxes that will ring you each time a client arrives which could work in those situations. There’s a lot that goes on behind the scenes, so you want to make sure that your apartment complex is easily accessible.
And again, when you take these courses, a lot of them will break that down. So, the complex that I’m in, you just put a code in the first box before entering the gated community and the second code when reaching the door. They get both codes automatically emailed to them via Airbnb the morning of their arrival. And when they get to the door, they have a key to get in. I also have a computerized lock as well. I can open and lock the door whenever I want to.
Ok so now that you found the perfect location, the numbers make sense, and the property is on board with your business model it is now to sign your lease and start to furnish your place.
Because time is money you want to furnish it ASAP because you want to get it on the market and make money as soon as possible.
I experienced a lot of mistakes in the beginning even though I followed the courses. There is a lot of things that I went through and that now I know going forward to avoid.
For one, I flew back three to four times.
I was mistaken and thought I can get the unit furnished in two to three days. I would constantly go back two to three days but then I would forget something. So, the next time I go furnish my next unit, I’m going to stay for about five days.
The second thing is security and locks in general. There was a lock that I ordered that I was able to open and close from the comfort of my home. However, there was a WiFi issue with the lock which caused me to fly back and then take the lock off and just change my entire check-in process. (The name of the lock was August Lock Pro)
That’s where you handman comes in….
You need one!!!
I found mines on Handy.com and he handles things for me when I’m not there.
The third thing that is also really important is having a cleaning staff especially if the unit is out of state. So, because mine is over 1200 miles away I had to have a reliable housekeeper on deck. There are sites that you can find housekeepers if you do not have a referral. There are sites that you list your unit on and there’s cleaners that would bid for your spot. One cleaner may say “I can do it for $70”, another one may say “I can do it for $65.”
Another reason to have a housekeeper is for errands. Let’s say you ran out of tissue, or some linens were damaged. Your housekeeper could handle those things for you for a small fee or you can hire a co-host. I choose not to hire a co-host and pay my housekeeper to keep things in check.
Once you build up your team, and once you fully furnish it, then it’s time to list it.
And that’s pretty much it. You just make sure that you’re not too high and not too low from your competitors.
So as of now, it’s been live for about 30 days since my unit was listed and I already have about $13,000 worth of reservations booked/completed. This unit is a 2 bedroom 2 bath 1100sq apartment in Houston.
However, I made a lot of mistakes. And this is the reason why I wanted to do this blog so you guys can prepare.
The first mistake which caused me a lot of headaches the company that I used I did not start to establish business credit.
I know, for me someone who repairs credit should establish business credit for every company. However, I have so many entities that I have set up that I just did not have the chance to set business credit up for all of them.
There were a few units that I applied for and that I really wanted and the numbers were just amazing. But when they ran my business credit, there was nothing on there. A lot of times they’re not looking for two to three years of history. They just want to see that you come up as a registered company and they want to see a score. That’s it. There’s not a lot of guidelines with that. So, I missed out on a lot of opportunities.
If you’re looking to get in this industry:
· Make sure that you register your business with the state.
· Make sure you have business credit set up.
· Make sure you have your DUNS number.
· A virtual address may help.
Have all of what’s above set up first for about 60 days while processing orders with these trade companies because it can take on average about 60 days to generate a business score.
The three companies I started with were.
· Flying pilot J (Gas card)
· Nav.com( credit builder account)
Another thing is that you’re going to receive a lot of No’s.
To help eliminate those denied applications make sure you find a course and go through it thoroughly (YouTube was also a great help)
Find Facebook groups and learn from other AIR BNB host!
However, you should be reaching out to 50 to 100 of those particular complexes per day. Yes, I said 50 to 100. Not that you’re calling them every day but there’s specific scripts that a lot of these courses would have that you could use when emailing the properties.
You’re going to be literally copying and pasting all day until you find that right unit.
Another thing is that you don’t want to go into this as just getting one!!!
The goal is to turn this into a big corporation. So why stop at one when you can have five to ten or even more throughout the years. I suggest to continuously keep going and every time you make a profit, take that profit and flip it and get another one and just keep on building and building and building!!!!
Essentially, you can make a lot more money compared to what you would renting out a home. Let’s look at what house hacking really is.
House hacking typically comes into play when someone owns a property and more than likely, they are still paying the mortgage for. They may be paying about $600 per month for their mortgage. Honestly, cash flow wise, most are bringing in about $200 to $300 per month when renting the property out. Now, that may not sound like a lot. However, as a homeowner, you’re making a lot of money on the back end. You’re building equity which means you can draw money out of that house.
But in the short-term rental industry you can make more money upfront.
Essentially you don’t have to own this property and a lot of the liability is off of you personally. There’s pros and cons to each one. And there is nothing wrong with doing both. But they both can have different outcomes.
It’s all based upon your preference!!