How to Analyze a Market for Airbnb (Part 2)

All right, so part two of this video, if you didn’t catch the first part, make sure you check it out earlier in the channel, we were going through how to analyse a market for short term rental. So in the last video, I talked about how to kind of narrow your search results down to three to five different markets you’re interested in. And I also talked about how to do your research on the regulations and figuring out what the future of the regulations will be. So you can make sure you’re investing in an area that is favourable to short term rentals from a regulatory perspective. Now, let’s go one step further and talk about the remainder of the analysis that I do to find the right markets to invest in for short term rental. So the next thing I’m going to do from here is really just kind of hone in on the returns on that market. So I want to do a couple of things here. One is I want to look at what the competition is. And this is actually very, very counterintuitive from what most people do. So I know that most people when they’re looking at markets, they’ll go in, they’ll see that in a given market, let’s say they go to err DNA, they see how many listings there are, and there’s 10,000. Well, a lot of investors look at that. And they say, wait too much competition, I’d rather not invest there. For me, it’s actually the opposite. If I see a market that has only a couple 100 properties, or less than 100 properties, I’m going to be very, very critical and sceptical of that market. Because if I see a market that has 1000s of properties in that market, it means there’s lots of demand there, there’s lots of opportunity. And most importantly, it also tells me that I’m going to have reliable data to inform my decisions for where to invest what property to invest in. As you can imagine, if there’s only 90 properties in a given area, then when I’m looking at, say a three bedroom, two bathroom property in a particular part of town, there’s probably not going to be more than a handful of properties to compare to, in order to figure out how much this property is going to bring in, in order to just analyse that property and makes sure I’m making a good investment. Whereas if there’s more properties, I’m going to have a larger data set. So I’m going to have much more confidence in the numbers that I generate from my analysis. The obvious downside is competition. And my answer that is just be better. Right? Again, I don’t mean to say that in a kind of cocky or arrogant way, it’s just that when you’re competing in a market, the reality is, there’s going to be enough demand to fill up the top performers all day long, right? Really, the people that have to worry about competition are the people that are in the bottom 75% of the market. Because the reality is, if you’re in the top 10 To 20 to 25% of the market, you’re gonna be competing, but you’re really gonna get booked either way, right? Because if there’s, let’s say 100 properties in a given market, and there’s 25 people or 30, people that are actually looking to book properties in that market, the top 25 properties are going to get booked, the bottom 75 are going to get fewer bookings. And that’s going to happen over and over and over again, a lot of people look at and they see, well, if there’s all this competition, then all 100 listings are going to get a random distribution of bookings. And suddenly, everyone is going to perform worse, it’s just not the case, those top 25 listings, they’re going to get all the bookings or the lion’s share of them, and they’re going to be eating well, while the bottom 75 listings, they are the ones that are really going to suffer. So as long as you have a really great listing, a really great pricing, really great photos, all that sort of stuff, you’re really going to be able to beat most of the competition, because again, you have to remember, most of the people listing their properties on Airbnb and other short term rental sites are amateurs. So you really just need to have the right training work with someone like myself to be able to have the right tools, the right strategies, and you can beat the competition. And that’s far, far easier to do than the other alternative. Because if you go and invest in a market that has very low competition, you might just be fighting against the actual overall market forces, there might just not be enough demand in that area whatsoever to actually get a good return. And there’s really not much you can do about that. Whereas if you’re in a market where there is demand, then you don’t have to fight those forces, you just have to make sure that you actually get the demand. And that’s a relatively simple and easy thing to do. So that’s one of the main things I look for is I would like to look for a market that has a couple 1000 properties or more ideally, doesn’t mean I’ll never invest in a smaller market, it just means I have to be much more critical that data. Guys just want to take a quick break here to say that for those of you watching, who want to build cashflow, and long term wealth by purchasing Airbnb ease and short term rental properties, there’s a link in the description right down below for a free training that will walk you through my exact strategy for investing successfully in Airbnb. Now, if you’re not ready to actually buy properties, and you want to get started managing other people’s properties on Airbnb the same way I got started and build a full time income managing other people’s properties. There’s actually another free training linked in the description down below as well. That’ll be a really great fit for you. So whether you want to invest in short term rental properties and actually build amazing cash flow and long term wealth by acquiring the assets, buying the properties themselves, or you’re looking to earn a full time income managing other people’s properties on Airbnb. We’ve got some awesome trainings there. link in the description down below, that’ll definitely help you out. When you sign up for the trainings, we’re also going to send you a few other tools and resources completely for free just to help you get started. Again, the links to sign up are in the description down below. And both trainings and all the tools are completely free. So make sure to register for the trainings, links in the description down below. The next thing I’m gonna look at is just comparing the average sale price, the average home sale price in that area for 12345 bedroom properties to the average revenue that a 12345 bedroom property can generate. And so I’m going to need a couple different data points there. One, I’m going to need to talk to my realtor to get comps on what properties have actually sold for I don’t want to look at the list prices of properties, I want to look at what they’ve actually sold for. And I also want to look at data from air DNA or other data websites to show me how well those properties will do. Now, at this point, I’m not looking for specific properties, I’m just trying to look at what the overall returns are generally going to look like. And so I want to make sure that there’s a good relativity between there’s a good relationship between the revenue that a property can bring in and the sale price, because obviously if for example, a three bedroom property is going for half a million dollars in this area, but it’s only going to bring in $20,000 a year in bookings, there’s just no way that the investment is going to make sense. Even if I found an absolute unicorn of a property in that market, it’s very, very unlikely that I’m going to get it to be enough of a unicorn to actually make sense in investment. So generally, we’ll see these types of markets be the ultra luxury ones where you’re paying for value that is just not going to be able to be valued that you can capture, again, booking on air DNA. So I’ll give you an example. There are some cottage markets outside of Toronto, where they’re buying ice lakes, you know, you’ve got boating, you’ve got all these drip different activities. But if you go to one particular market, it’s called Muskoka. That area is very prestigious a lots of people that live in Toronto, like to buy properties there, because the lakes are prestigious, you can you know, basically you’re part of this cool elite club if you have a cottage up there. And so particularly on this one lake Lake Joseph in Muskoka, it’s a lot of prestige. So properties go for really, really high numbers. The problem is that people that are booking Airbnbs, don’t really care about being on Lake Joseph, there’s no real benefit to them being on that particular lake for the weekend, over being on one of the other lakes, that lake is no more beautiful, really, it’s just that it’s a big lake with a lot of prestige, because if you have a cottage there, you get to have a cottage there and tell people, you have a cottage there. So in some markets, there’s just value that you’re going to pay for that significance that you’re gonna pay for things like that, that you’re just not really going to be able to capture value from by listing the property on short term rental websites. So that’s where this level of analysis will help you just eliminate certain pockets as not being good for investing. Then from there, what it’s also going to do is allow you to highlight some of the best opportunities in that given market. And what I mean by that is, you’ll be able to identify the sizes of properties that have the best overall returns, in general, it’s not going to tell you that you have to buy one of those properties. But if you see that, for example, you can buy a three bedroom property for half a million dollars, and it brings in let’s say $100,000 a year on average. But then if you get that four bedroom property, add that additional bedroom, and it’s only $510,000 On average, or $520,000 On average, but brings in 130 or $150,000 a year. Well now your soulmate, suddenly only paying 10 or $20,000 more for the property in exchange for 10 or $20,000 more a year in bookings. So you can see that your ROI is going to be much much stronger in general on those larger properties for example, now in every given market, there’s going to be a different kind of sweet spot where a certain size of property generally will perform better than others. And so that’s just good to know so that you can start narrowing your search down if you do go into that market on the ones that are going to give you the best overall return now in another video we’re gonna go over and we’ve already got other videos on this channel as well that go over how to actually start analysing property specifically, but in this video that’s basically my my basics of market analysis actually looking at the markets themselves and figure out which ones are going to support short term rental investing for not just right now but also long term. Let me know your thoughts if you have anything that you think I missed. If there’s anything else that you’d like to do when you’re analysing markets, let me know in the comment section down below. If you found this video helpful and useful to you, then make sure you hit that like button. Give me some love on the video. It really helps me to get these videos in front of more people. And absolutely make sure that you make that you be sure to hit that subscribe button as well so you can stay up to date with the two new videos we post every single week on this channel. That’s all for now. Thanks so much for watching, and I’ll see you in the next video.