Reacting to BAD Airbnb Advice on TikTok

Reacting to BAD Airbnb Advice

The Internet is full of sketchy bits.

I like to think I’m a guiding light in a sea of bad information.

In this video, I’m going to show you two videos I found on TikTok with (you guessed it) bad advice. These videos have bad advice for analyzing a property.

I’m big on analyzing the right way. I can’t stand the thought of losing money, and I’m sure you’re the same way.

Then why are so many investors analyzing properties the way these people are suggesting in this video? Watch now and see why this line of thinking is completely wrong.

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Expand Transcript

Alright guys, in this video we’re going to be jumping into tic tock we’re going to be going over some videos that I’ve found on tick tock that have some truly horrendous Airbnb investing advice in them, ranging from just flat out bad advice to people that honestly I think are just completely out to lunch. And the hope here is that you will learn from these people’s mistakes you’ll learn not to follow these people on tick tock or at least not listen to this specific advice of theirs on tick tock so that you’re not falling victim to the mistakes that they’re making. And you know, losing a bunch of money wasting a bunch of time investing the wrong way in short term rental properties.

So that being said, let’s jump into it. And let’s get started with this video I found that has 54,000 views on Tik Tok here. Now, again, I’m not trying to poopoo on any of the people specifically in these videos. They’re just these videos individually are horrible advice. And I’m gonna break down why that is. So let’s start with this one

Speaker 2 1:01
we purchase in Airbnb, we always look at the numbers behind it to ensure that our purchase price is justified. And we’re gonna get the necessary returns the two key factors that you want to focus on on your average daily rate and your occupancy rate, because that will give you your estimated annual income. So you can look directly on Airbnb and see in that area, what similar properties are going for per night. And you can generate a estimated nightly rate for that property. And then you can use programmes such as air DNA, or there’s other ones out there that will show you the average occupancy rate in the area. So let’s say it’s 75%. And let’s say your average nightly rate is $300. So you multiply $300 A night by 250 days out of the year, which is 75%. And that gets you $75,000 per year. So the

James Svetec 1:53
so now you’ve arrived at a total shot in the dark gasps at what the property will generate. That’s probably only off by about 50 to 75%. Right? Because here’s the problem. And this is a mistake that I see people make all the time, I cannot tell you how many investors I speak with. And when I asked them what their process is for analysing properties to invest in short term rentals, they describe this exact process, it is horrible. You literally might as well write down a bunch of numbers on a piece of paper and throw a dart at it like that would literally be just as accurate as this method for determining your rental revenue potential for an Airbnb property. Here’s the problem with it. She’s using Airbnb to try to figure out the average nightly rate, which most people who do that don’t know about air DNA. So the fact that she knows that air DNA exists, she’s used it as it appears in this video. And she isn’t just using the rates from air DNA or the revenue data from air DNA. Beaumont, why would you not just do that you’re already there. That’s what you want to do. Because the problem with looking at the nightly rates on Airbnb? Well, I mean, there’s lots let’s go through them. First of all, if you’re looking on Airbnb, the only properties that you can see are the properties that aren’t booked for the dates that you’ve selected. So you’re only looking at the properties that haven’t been booked, you’re not looking at the properties that have been booked, which may or may not be priced differently, and almost certainly will be priced differently from the properties that are not booked. So the only data that you’re looking at are the properties that aren’t booked. And what you’re trying to determine is how much the property will book for which is a guess, because you don’t know if the property will actually get booked or not. And then the next thing is you’re going to have to figure out an average nightly rate. So even if we just discount that, which would be crazy, then we also have to try to figure out an average. So what we want to look at probably 50 to 100 listings, okay, and then they’re priced differently on weekdays and weekends, they’re priced differently every single month at of the year in most markets. So you’d have to comb through 50 to 100 listings calendars day by day by day, and average out all the numbers over at least an entire year. Right. And so in order to do that, you’d probably spend let’s say an entire week, just going through to find the numbers. So like, if you’re okay to spend an entire week crunching numbers to to analyse one single property, then you can use Eridian numbers. And when you do that, you’re still only going to you’re still going to be drastically off from your projection because you’re still only looking at the properties that haven’t been booked. Add to that the fact that she doesn’t talk about backing out the service fees which if you look at air DNA, it doesn’t include that if you look at Airbnb, it does include that you’re including the service fee that Airbnb charges that you as a host are never going to see into these numbers. So you’re automatically building in about a 15 to 20% increase in your revenue that she’s not accounted for here. The numbers are drastically inaccurate and the way you would have to like in order to do this even accurately, or even do this properly, still inaccurately, but properly it would take literally A week to figure out those averages. Otherwise, you’re describing a couple of properties and looking at the nights in the foreseeable future. And that’s again, just gonna be wildly inaccurate. To give you an idea, I have several properties that in the low season, they’ll rent for, like $200 a night, and in the high season, they’ll rent from eight to $1,500 tonight. So if you looked at it in the low season, and just grab the next week’s nightly rate, then you would drastically underestimate how much the property could bring in. If you went in the high season did the same thing, you would drastically overestimate how much the property could bring in. So yeah, it’s just terrible, honestly, really, really bad. The methodology here is just horrible. Just bad advice. Do not do this. If you’re analysing properties for short term rental. Let’s go on to the next one here, let’s, here’s how

Speaker 3 5:46
owning just two of these properties near Savile beach could set you up for life. So on average, at the size and location, this property should get you about 330 a night, let’s do the math. 330 a night multiplied by 30 Nights is $9,900 a month. But you probably

James Svetec 6:01
Yeah. But like, again, the average is, is it doesn’t work here, because here I’ll break it down a little bit more, we won’t be

Speaker 3 6:08
100%. Booked air DNA shows that this area has an occupancy rate of 72% factoring that and we get a total before cost.

James Svetec 6:15
So the problem here is that you’re averaging your nightly rate at $303 a night, and then averaging your occupancy rate at 72%. But the problem is that like you’re just not going to run accurate numbers there. Because when your average nightly rate is much higher in the summertime, you probably have a higher occupancy rate as well. And then when it’s lower, you have a lower occupancy rates, you have a blend between these two, that this doesn’t actually accurately represent the property is not really going to do like $120,000 a year for this property. You the numbers are off. But that’s honestly not even a thing I had the biggest problem with that’s coming up here. So let’s jump into it.

Speaker 3 6:55
The $7,128 now won’t cover all that.

James Svetec 6:58
So he goes on to say I won’t cover all the expenses here and I’ll play it out. So you can see. I won’t cover all of them. But you can pause the video and check it out. And if we look at the expenses that he that he’s looking at, on a monthly basis, we’ve got the Airbnb fee, we’ve got the utilities at $300 a month. But 277, we’ve got cleaning costs, cleaning costs here are $360 per per month, which is insane, there’s no way that this property is getting cleaned for $360 a month, this property would probably cost at least $200. Like bare minimum $150 to clean one time, and with the occupancy rate is factoring and you’ve got to have probably five Six turnovers per per month. So that’s way off lawn care. Sure property management for property management on on a short term rental property, you’re paying 20% bare minimum. So I don’t know what he’s got Property Management listed here. As for $350, if you are internally managing it, then you can you know, you can factor in cost there. But like if you’re actually outsourcing a property management, that’s going to be $2,000 a month, not 350. If we’re looking at the revenue numbers that he looked at there, restock consumables $45 Yeah, right. Miscellaneous costs $65. So like, we don’t have internet in there, for example, like it’s just not in yours. So you’re trying to rent a place that doesn’t have Wi Fi, I assume that’s crazy. You don’t have insurance factored in here. Okay, so we’re just not going to insure the property is that the case, we don’t have like accounting fees in here. So we’re just not going to do our taxes at the end of the year. Like there’s all these expenses that are just flat out missing from this breakdown here, and that and others that are just way off, like like orders of magnitude off, right. So let’s play this out.

Speaker 3 8:53
Cost individually. But if you’re interested here, they are subtracting that we get

James Svetec 8:56
Yeah. And so he goes on to show like the monthly income and then he’s got like in small text here. Oh, by the way, if you chose to buy in 2022, you’d also have a $3,000 mortgage payment. And it’s like that’s not fine print my guy like that’s not something you put into the fine print. That’s also something to factor in here for the investment is the is the mortgage payment, you want to look at how much that’s going to interest like, Yeah, this is just a terrible breakdown. I really don’t like the the lack of clarity around the numbers, because it portrays this as being a much, much better investment than it really is. And it just I think, again, it just shows people that they it’s kind of promoting this idea of really, really poor breakdowns of analysis. And I think that people really need to be doing more due diligence, not less. So honestly, I thought we’d get through more this was I just want to really stress how important analysis is to do properly. If you liked this video, let me know I’ve got some other bad Tiktok advice here that I’d love to go through with you guys. I don’t want to get this video. going too long but if you liked this video let me know hit the like button, press subscribe make sure you subscribe to the channel we post two new videos every week. And just let me know in the comment section down below if you have any, any other thoughts or if you’d like to see more videos like this, all that being said, guys, thanks so much for watching, and I’ll see you in the next video.

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