The NEW Trend "Airbnb For Investment?"

There is a new phenomenon sweeping the investment circles that I run in which seems to be the ever-popular strategy of buying vacation rentals as investment properties.

While buying vacation rentals as an investment is nothing new, the technology that has surfaced in recent years IS, and it has had a MASSIVE impact not only on the bottom line ROI, but on the ease of managing such opportunities. In the past if you wanted to invest in vacation rentals you needed to first buy the property, then either embark on a brand new full-time job of managing the bookings, the marketing, the cleaning, the maintenance, the rent collection, the deposit collection and return, and in some cases you even needed to become a short order cook=)

Even typing all that makes me want to throw up. Your other option was you could go through the process of buying the property, typically a condo with a high HOA that took care of most of the maintenance for you, and then contract everything else out to a management company that would take anywhere from 25-45% of the GROSS profits. By the time you got done paying your HOA dues, and the cut to the management company even the most desirable properties would typically be negative cash-flow investments that owners would have to justify to themselves by saying "Hey at least it almost pays for itself and we get to use it whenever we want".

The NEW phenomenon is that with technology advancements from companies like VRBO, and Airbnb you can now effectively become your own vacation rental management company overnight, and actually in some ways have more exposure and marketing horse-power than the traditional management companies ever had. Sure you still pay the web sights their cut, but percentage wise it amounts to a tiny fraction of what a full-service company might have charged even as recent as 5 years ago. This new technology not only makes marketing and managing your vacation rental so easy that even my retired mother who barely knows how to use a computer can do it and does do it for multiple properties, but it also DRAMATICALLY increases your ROI (Return On Investment).

I have been a part of owning/managing vacation rental properties in Napa Valley, CA, Las Vegas, NV, Park City, UT and others and what I have found consistently is that not only do we cash-flow positive, but we actually on average are cash-flowing at a 2-1 or even 2.5-1 ratio HIGHER than what we would GROSS if we rented out the properties full-time at the market rent rate. This. Is. A. Game-Changer. PERIOD!

If this trend continues it means that the traditional rules of cash-flow investing will simply not apply. You might have heard the old saying which I have used many times "Ugly properties get the best returns". This has often been true meaning that many times the cheaper area older rental properties can be purchased at better entry prices, and on a percentage basis will rent higher thus creating a higher cash-on-cash return. If you need to know how to calculate a cash-on-cash return you can watch the video I made HERE: ROI CALCULATOR

Typically when buying a "Class A" property, or a higher value property in a prime location, you pay a big premium for curb appeal. You pay a big premium for "pride of ownership", all that stuff that investors like me normally don't give a dang about but that makes everybody else feel really warm and fuzzy inside.=)

So let's examine the true shift that we are talking about here when it comes to vacation rentals:

• We're buying prime properties, we're still paying the premium on the buy for the pride of ownership, and to be in a desirable location.
• If we then use it as a vacation rental the old fashion way our returns are all eaten up by the management company.
• If we rent it out full-time there's no management fees, and no hassle but then we can never use our trophy property that we just spent all that money on, and the overall cash-flow is still lower comparatively to our purchase price so the NET return is still likely horrific percentage wise.
• So the shift is not really in the property, it's not in the market, maybe technically not even in the strategy - THE SHIFT IS IN THE TECHNOLOGY! By utilizing the technology available to us we can now manage the vacation rental ourselves with ease and get the benefits I outlined below:

1. We earn a higher overall cash-flow over the course of the year
2. We still get to use our trophy property for our own personal and family use
3. We still get all tax benefits associated with any other investment income generating property
4. Sites like Airbnb actually make it beyond easy to track your cash-flow and provide an automatic 1099 at the end of the year
5. AND as a last hidden bonus, you get the additional equity appreciation that typically comes with a higher tier "Class A" type property as opposed to what you might see with the bargain basement deals that you might have been forced to go to to get cash on cash returns like these.

This is fairly new and there are many many very smart investors (maybe even including yourself) that have not explored this as a strategy. Once they all realize the obvious benefits we now know then competition increases and the returns dissipate but for the next 2-4 years I do see an AMAZING opportunity to acquire some beautiful assets that do generate high returns and be able to have that pride of ownership that I'll be honest even hardcore cash-flow guys like me like as well.=)

Thanks as always for being part of my network I hope this adds some value to you and have a great day! I am having a special Real Estate Networking Group training webinar for all the members of my groups and I'd love to have you be part of it YOU CAN GET DETAILS HERE USING THIS LINK

• Stephan Piscano