The FINAL Straw… Shelby Church QUITTING Airbnb (My Reaction)

Speaker 1 0:00
Hey, what’s up guys, it’s James here. And in today’s video, we’re going to be reacting to a video that honestly nobody saw coming from Shelby church, why she’s quitting air b&b. For those of you that have been following the channel for any length of time and seen the other videos that Shelby has posted, and those videos that I’ve reacted to, you’ll know that, frankly, this really doesn’t come as any kind of a surprise to me that she’s quitting Airbnb. In fact, I think it’s a ways overdue, and I want to react to this video, because I think there’s gonna be some really great takeaway for any existing or prospective Airbnb and short term rental investors out there.

Speaker 1 0:44
This is actually just a really cool thing to be able to see on YouTube, because this is exactly the the typical journey of a lot of these opportunistic, uneducated investors that got into short term rental investing, when there was a whole bunch of opportunity when the market was shooting up, and are now being forced to leave the market because they invested on a really, really horrible fundamentals without doing any proper due diligence or analysis. And so this investors like Shelby are exactly why there are really great buying opportunities in the market right now is because a lot of those opportunistic investors that got in without doing due diligence, they’re being forced to leave the market now because, you know, like the like the saying goes, you see who’s swimming naked when the tide goes out, and the tide has started to go out. And that’s where you start to see all these opportunities popping up. So let’s jump right in. And let’s dive right into the video.

Speaker 2 1:41
You saw the title, right? I’m quitting Airbnb. No, it’s not clickbait. It just doesn’t make sense anymore. So today, I’ll get into why I’m quitting what the last straw was for me and what I’m planning on doing with this house. Now, as you guys know, hosting on Airbnb wasn’t as profitable as I expected, but it was a generally good experience. But something changed recently. And it is the nail on the coffin for Airbnb in California. It’s a new bill that’s introducing an additional 15% tax. Anytime you go to book an Airbnb in California, it’s called SB 584. And they’re rushing to get this into effect by 2025. So this is a big deal, because anytime you go to book a hotel or short term rental, you’re already taxed a transient occupancy tax. And it’s usually around 10%. It’s a little different in each city, you can see it’s usually 10%. And this new unprecedented tax is on top of the transient occupancy tax on its own, the T ot tax brings in a lot of money for Palm Springs and 2023 it’s estimated to be about $50 million. So hotels and short term rentals bringing a tonne of money for our city. It’s the biggest revenue source and additionally, Airbnb s are taxed on any profit that they make as well. So it’s not like Airbnb is are paying taxes. But still, SB 584 is presenting a tax like I’ve never seen before, like higher than the T ot tax. That’s kind of wild. So this is good news to a lot of people because I know a lot of you guys know, hate Airbnb, and I get it the tax money is to go towards building affordable housing units. Currently, the city only spends $3 million of their budget. Okay,

Speaker 1 3:14
so right off the bat. There’s so much going on here. So first off, they’re trying to get this implemented by 2025. She said, and it’s late 2023. And that was the final straw why she’s taking the property off of Airbnb. That doesn’t add up. Why would you not just keep on making hay when the sun is shining? If things were actually going well, she would just wait until 2025 to take the property off of short term rental. Why would she not right? Obviously, there’s more going on here, as is evident in her last videos, because she bought a horrible property in a bad location that cost like $1,000 a month or something ridiculous to heat the pool. Like she did every she made every mistake in the book that there is if you’re investing in short term rental property, she didn’t run the numbers on it, she didn’t analyse it, she didn’t do anything to figure out if it was a good investment or not. She didn’t look into the regulations ahead of time. Like all of this stuff is comical, the level of mistakes that she’s made, she’s literally made all of them. So for anyone that’s looking at this, that’s an investor or wants to be an investor. If you want to know what not to do, if you want to know the most common mistakes that you want to avoid, literally just watch her series on these videos. Because she makes all of them like every comm mistake. She overpaid for a property. She got a property she didn’t analyse. Well, she didn’t look at the expenses properly. Like she literally made all the mistakes in the books and look at regulations, all that right. So I’m gonna go out on a limb here and say that this, this 15% tax that, by the way, is going to apply to every one of her competitors as well. Is not the straw that broke the camel’s back. This is just her reasoning of why she’s leaving. But she’s recently leaving because she, you know, made a whole bunch of mistakes and did a really horrible job of it. And she’s probably losing a lot of money renting this place as a short term rental. So that makes sense. As far as the tax itself, or like, what do you do if a new tax gets imposed in your area? Really nothing, you got to remember, again, like those taxes generally just get passed on to the end user. So you’re just going to charge more for your listing, because now you have more expenses, everyone in the market had their expenses go up. So prices will go up. It’s just like, if they raise the minimum wage, it’s not like if they raise the minimum wage, suddenly, grocery stores start going out of business. Now, every grocery store has employees that are being paid minimum wage, if minimum wage goes up, your groceries get more expensive, right. So if it were a tax that were specifically being applied to just her one property, sure, that would be really challenging, probably devastating. But it’s a tax is being applied to everyone, the cost is going to get passed along to the end, user prices are going to go up when that tax gets affected. And it’s really not going to make any difference. And again, like if you’re if you’re, if that’s what what actually ends up ruining your investment, it’s only because your investment was hanging on by a thread to begin with. But again, I want to remind you guys, if we’re watching this, and we’re being critical, and we’re actually thinking about this, this can’t possibly be the reason why it’s no longer profitable, because it hasn’t even happened yet, right? She hasn’t even seen what’s going to happen when this thing gets affected. And so she’s just making a preemptive call, which tells me again, like it just doesn’t make sense for her to be owning this property as a short term rental property right now, let alone when there’s a tax imposed, which is all well and good. I just think that like, let’s be transparent about it. You’ve been very honest, so far about how horribly things are going. Let’s not start pushing the truth. Now, on

Speaker 2 6:56
an affordable housing reserve. Most of the money goes to General Government and the police. It all sounds really great in theory, but will it actually work? And what am I going to do with my house? Let’s get into it. First, we need to look at how this affects if you were to book my house, right now in November, it’s kind of a slower season. So it’s 575 a night you end up paying $328 in taxes, who the reservation total is around $3,300. Now in 2025, when this whole thing goes into effect, it’s going to make it so that the taxes you pay are $749. So the total reservation goes from 3300 to 3745. The amount that you’re paying in taxes is now more than the amount that you’d be paying for one night staying here. That’s crazy. And the thing is, hotels don’t have to enforce this tax. So whenever you go to California and stay in a hotel, you just pay the T ot tax, which is usually around 10%. Depends on the city. So if you’re a group of like four friends, I just don’t see why you would ever stay in an Airbnb, it doesn’t make sense, you’re automatically going to get a 15% discount by staying in a hotel. I mean, if I was looking to book a place in Palm Springs, and I didn’t own my house, I wouldn’t book it. I would not book it if I had to pay 15%. More like Are you crazy? Who would do that? Unless you absolutely need a house and you need the privacy? Maybe you’re like a six person group. But I just it just now it just does not make sense. Keep in mind this. Yeah, I

Speaker 1 8:23
mean, again, like if you’re, if you’re competing against hotels, yeah, I can see the argument here. But if you have a whole home listing with multiple bedrooms, you shouldn’t be competing really, with hotels, like to an extent you are but it’s two very different products. And you would have to be way more expensive than getting multiple hotel rooms as the alternative in order for it should not be beneficial. Like anyone that’s booking for a four person group would probably rather be in a whole home that has a swimming pool in the backyard. It’s got privacy that’s got a kitchen, it’s got a living room dining room, then have two hotel rooms or have people sleeping on like a pullout couch so they’re just not actually really comparable. And again, a lot of this comes back to if that is the type of property she has where she is really directly competing with hotels. I mean, you just made a bad call. You just bought the wrong property. We already knew that. Like that’s not any new news here because she didn’t analyse the property. She didn’t do her due diligence. She is bought a bad property

Speaker 2 9:24
is a bill that is being passed all across California. It’s not just Palm Springs. So if you’re ever going to book an Airbnb in San Diego and 2025 I mean, just look at hotel just don’t even bother anymore. Honestly, that’s my thoughts on it. So for me, this is the last straw, I think. Yeah,

Speaker 1 9:40
let’s see how that works out. Let’s see if that just shuts down the entire industry. If everyone just goes back to hotels now because of a 15% tax like gone. It’ll just

Speaker 2 9:51
make it too tough to compete with hotel but I’m actually not selling my house. So again,

Speaker 1 9:57
all of this is herb, just pure Speculation with like, she’s speculating on the what the impact of this tax is going to be. And she’s just purely guessing and using anecdotal reasoning to say, Well, I wouldn’t book if it were 15% more, but it’s like, yeah, but you do pay more at the grocery store, minimum wage went up. And you’re, you know, like, that’s just not actually true, right. And if we look at other cities that have imposed taxes on short term rental properties, what she’s speculating is going to happen, which is like no one’s going to travel in them anymore, is completely on on substantiated, like it’s not actually backed up by the 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 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 s. 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, there’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 that are linked in the description down below, that will 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. And so again, if you want to be like a really speculative, like, basically, you’re just like yoloing your money into into properties and just hoping for the best crossing your fingers then like yeah, sure, like, then just making a knee jerk decision, like, let’s take the property off Airbnb, because of what might happen if this happens that I’m speculating will happen and like a year and a half from now, maybe that’s going to happen. So let me just completely change my whole investing strategy. Yeah, of course like that, you know, that’s one way to invest. But it’s obviously not an intelligent way to invest. And again, not super shocking that that’s the decision that she’s made for a

Speaker 2 12:20
plan for a number of reasons. And that is to turn it into a long term rental, that is my plan and 2025. I’m 99% sure at this point that that’s what I’m going to do. Although I will take the first month or two of the year and see how it is I’ll see if people are still booking. But I just don’t think it makes sense. Like I don’t even want to encourage people to pay that much in taxes, when they can just go to a hotel, it just it’s going to be cheaper to get a couple of hotel rooms for you and your friend.

Speaker 1 12:46
This so it’s it’s tough to watch because like, like, don’t be wrong, if you have to, as a backup plan, go over to long term rental, nothing wrong with that I think mid term rentals would make a lot more sense as like an intermediary option. But if you’ve done your due diligence, and you bought a property that is going to cashflow positive as a long term rental and you have that as a backup plan, that’s a phenomenal backup plan and actually highly recommend it. And if if Shelby were like a, you know, a good investor who had invested in solid fundamentals, and some crazy thing happened in the market that changed and she had to go back over to long term rentals. And she had made sure at the beginning that that was going to land her cashflow positive, great. That’s actually phenomenal. But I can virtually guarantee you she never did that due diligence. She didn’t run that analysis. She didn’t actually crunch the numbers on that when buying the property. And as such, I can virtually guarantee you that she’s going to be cash flowing negative on this property as a long term rental heck, she’s already cashflow negative as a short term rental. So there’s virtually no way that she’s gonna be cashflow positive, as a as a long term rental, which is very, very risky. Right? If you know, basically it costs her money every single month to hold on to this property. And then what if things change in the market, like the property value goes down, costs get too high, she loses her income, or she gets a significant income reduction, and she can’t afford to keep the property but she can’t sell the property because she’ll lose money selling it. That’s how people really ruin themselves financially. So this is a really, really terrible place to be because she hasn’t done any of the due diligence. And not to mention all the challenges you’re gonna are gonna run into with like, especially being in California, the tenancy laws are like atrocious, they’re horrible. You know, if someone just stops paying rent What’s she gonna do? Right? She’s gonna have to go through a lengthy eviction process. It’s gonna be a nightmare. There’s gonna be more wear and tear and damage to your property. Oh, man, like I can’t even Yeah, this is just this. That’s a lot.

Speaker 2 14:51
You know? So turning into a long term rental makes a lot more sense. You might be like now why not sell it? Number one reason is because I love this house. I put so much work into it. And I also, number

Speaker 1 15:02
one reason is because it’s not worth nearly as much as what I bought it for. I couldn’t sell it without losing a whole bunch of money, love

Speaker 2 15:08
Palm Springs, I could see myself maybe retiring here one day. So I don’t want to let go of it when I already have this house and put so much work into it. And I’ve locked in this low interest rate and all this, you know, it’s just No, I don’t want to sell it. It’s not purely an investment to me, I actually would like to use it again, it really just does not make sense to sell financially right now. If I sold it, I would just pay so much in capital gains taxes, and then I would go to buy something and I wouldn’t even be able to get anything as good because interest rates are so high, it doesn’t really make sense to sell but long term renting it, it turns out is looking like truck

Speaker 1 15:43
wouldn’t pay capital gains taxes, you probably lose a bunch of money. It would be

Speaker 2 15:48
quite profitable, probably more profitable than Airbnb ever was. Actually, I actually met one of my neighbours recently and he told me that he turned his Airbnb into a long term rental and he’s making more. He’s making more because you don’t have to pay all the expenses. You don’t have to pay for the utilities Simply Safe YouTube TV, the insane electric bill, the gas bill. Instead the tenant pays for what they want and what they use in the mortgage for my house right now. It’s 3200 a month and Redfin and Zillow think I could rent this long term for 6200 a month, spacing

Speaker 1 16:23
out on a Zestimate guys, she’s based Redfin, Zillow, and she’s also not taking into account her her utilities. She’s not doing any account or property taxes, she’s not taking into account her her property insurance. She’s not taking into account any maintenance like, Man, oh, just one bad decision following and access this is not good. So

Speaker 2 16:50
to be making 2000 a month in cash flow. Now I’m sceptical if that’s actually possible, but we’ll see. That would be way better than doing Airbnb.

Speaker 1 17:01
I mean, come on, that’s not cash flow. That’s just not what cash flow is. You have other expenses on the property. It’s not just your mortgage, you’ve got your taxes, you’ve got your insurance, you’ve got your maintenance, like, Ah, man,

Speaker 2 17:17
plus, I wouldn’t have to deal with all of the hassles that come with running an Airbnb, it’s really not that bad. But you do think about it a lot. And there’s always

Speaker 1 17:24
stuff Oh, great putting the caption and I wouldn’t need a property manager. So she’s gonna go and find the tenant herself. And she’s gonna deal with all the headaches of that tenant, like, she’s probably not going to screen the tenant because we know she doesn’t do her background research, she’s probably just gonna have someone in there that’s gonna like stay, stop paying rent, do damage to the property, it’s gonna be hard to get out. Like, come on like this. Just Just be smart. Just like make better choices.

Speaker 2 17:48
That comes out that you need to be repurchasing. And with a long term rental, there’s a lot less of that. Additionally, just on a personal note, my parents live here in Palm Springs out and my sister and her boyfriend also bought a house here. So I tend to just visit them and stay with them now then even use this house anyway. So I don’t really care as much about having it as like a partial use vacation home. So here are my own personal thoughts on this bill, even though nobody asked I’m gonna give them to you anyway. So this bill is to provide funding for affordable housing for the labour force. And honestly, if it does that, and everything works out according to plan, I think that’s great. Like, of course, we need more affordable housing and teachers should be able to afford a house. I think we all agree with that. I think the issue is I genuinely don’t think it’s going to do that California makes a lot of money in taxes to begin with, it’s estimated they’re going to bring 130 billion with a B in income taxes alone or 2022. So that’s not to mention property taxes, sales tax. So I don’t think the issue is funding, I think the money is there to build affordable housing. It’s been there, California has always made a tonne of money. It’s just not ever being spent in the right

Speaker 1 18:58
way. A resident economist chiming in

Speaker 2 19:01
and I don’t want to get too much into this, but like, clearly, it’s not if we don’t have affordable housing now, when we have so much money going too much money. I

Speaker 1 19:09
mean, frankly, who cares? Like frankly, like, you know, I’m not qualified to speak on this. I’m not qualified to speak on this. Like, who knows, who cares? Like, it doesn’t matter whether the tax actually solves the problem or not like I get it, we want to solve the problem. We want there to be affordable housing, but like, who cares? Like it just doesn’t actually matter? The reality is you made a bad call, you bought a bad property that you shouldn’t have bought. And now you’re just chasing up one bad decision with the next you got this big sunken cost bias where now she owns the property. She’s not being forthcoming about like, why she’s actually doing this. It’s not because of some impending tax bill. It’s going to come a year and a half down the road. Let’s be honest, it’s because she’s losing money. She’s barely breaking even managing this thing as a short term rental. Right? She’s not not selling it because she loves The Property wants to retire here someday, and she’s gonna have this big capital gains expense, capital gains tax expense, if she sells it, she’s gonna lose money. If she sells the property like she can, she probably can’t afford to sell it. Or if she did, she would take a big financial hit that she doesn’t want to take. And she’s just letting it be a slow bleed of negative cash flow. Like she’s, you know, and to do this, and then she’s projecting for like, the number one problem was, Hey, you didn’t run projections, you didn’t actually do a proper analysis, you made a bad call without proper due diligence. And now she’s making another big call of I’m going to cold on the onto the property and do long term rental with it. And her due diligence starts and ends with mortgage payment. Zestimate. Cool. Like, that’s not due diligence. That’s not proper analysis. That’s just, it’s just horrible, horrible decision making the government

Speaker 2 20:50
here, I personally think it’s not fair to put the entire brunt of the lack of affordable housing on short term rentals when so many things a

Speaker 1 20:59
15% tax is not putting the entire brunt of it on Georgia rental. It’s a 15% tax Come on, it’s affected.

Speaker 2 21:06
Its zoning laws, it’s a fact that there’s no incentives to build. So it’s not enough new construction. It’s the people who are landlords that own 10 to 100 units. And I

Speaker 1 21:15
agree, I agree with a lot of this, this stuff, but like, again, who cares? Like, again, at the end of the day, just take it for what it is we knew that politicians are not going to want to do all like rezoning like big these big, huge systemic changes, trying to solve the problem. They’re gonna impose a tax, it’s easy to do. They’re gonna say, look, what I did reelect me, great politicians always do that. We know that’s what happens. So why don’t we do our due diligence and research the market that we’re investing into, to make sure that we’re investing into a market that is and will very likely stay friendly to short term rentals, like, yeah, come on,

Speaker 2 21:55
and just are hoarding those forever, like short term rentals are a relatively new thing. And we’ve had an affordable housing problem long before short term rentals. I think some people think that if everybody quits Airbnb, suddenly housing is going to be affordable. But it’s not because there’s so many things that affect the housing market, I think what we’re actually going to see happen is the city’s going to bring in less revenue, there’s going to be probably less Airbnbs, the reality of Palm Springs. And a lot of people don’t want to hear this. But this is the truth about Palm Springs. Most of these homes are second houses, they’re second houses for rich people, they’re used for a few months of the year. And then the people own them go back to Canada or Chicago or wherever they came from, it would be great if they can build more affordable housing. But I want to see the plan of how they’re going to do it. There is no plan. I looked through the whole bill. There’s no specific plans of how they’re going to spend the money. I even reached out to the office of the Senator that wrote it to interview her about it. They seem to interested actually in an interview, but then they ended up not responding at this point. I can’t actually tell if this thing has passed or not. I’m not here to convince him to vote on anything, because this actually isn’t a bill that we as citizens can vote on. All in all, I don’t love this bill. Of course, I’m biassed as a short term rental owner. But I also think it’s just going to discourage people from travelling to Palm Springs, a lot of my guests are from out of state. They’re from places that are really cold, Chicago, Oregon, Canada, and if they’re having to pay 26% in taxes for a house, I actually think they might go to Florida or something, let’s be real California probably already has the money for affordable housing, they just never allocate it to that a reality, whichever comes first. Hopefully affordable housing in Texas, they are throwing up new houses all the time, because it’s easier to and if they made it a little bit easier to hear dreamline The permit process make it faster, easier, cheaper to build, then it’s just simple supply and demand, there would be a lot more houses. Okay,

Speaker 1 23:54
pop quiz, what’s going to be a better bet to make? Should we go and invest in a market like Texas, where the the setup all the systems, the zoning, the regulations are all more favourable for short term rental investors? Or should we invest in California and hope that they change all of their political systems? What you know, what’s the path of least resistance here? Like, again, I get it, I agree, but it’s the wrong conclusion, like Sure. You can make a YouTube video and talk about how you don’t agree with the political decisions being made. Is that going to change them? No, right. But you as an investor, you got the you had the decision, like you had the choice, you can invest in California, you can invest in Texas. The reality is you made a bad decision, you made a bad call, right? And so to then go and say, Well, now it’s the government’s fault that I made that No, it’s not like you knew what you were getting into or you if you did, and it was because you chose ignorance. You chose not to actually do your due diligence and think this stuff through ahead of time. So I think again, the big takeaway Hear For everyone watching is to do your due diligence, right? To just actually look into regulations look into the market that you’re investing in, invest in short term rental friendly locations and buy properties that actually make sense to short term rental properties. If you are worried about if you want a good backup plan, it is definitely smart to have a backup plan, analyse the numbers on it ahead of time. So you don’t get stuck with a property that’s not worth as much as you bought it for can’t cash flow, and then you’re relying on like a Zestimate and your mortgage bill to try to see is this thing going to cashflow positive as a long term rental big surprise. It’s, I guarantee you I virtually guarantee you that it’s not like the numbers just aren’t going to add up it’s not going to make any sense. So that’s my thoughts. As always, let me know yours in the comment section down below. If you thought this video was valuable or helpful if you learned something not to do today, then make sure you hit the like button down below this video and give it a thumbs up. And last but not least if you are new here to the channel or you’re not yet subscribed, make sure you hit the subscribe button as well. We post two new videos every single week sharing about all things Airbnb management, investing, hosting, so make sure you subscribe so you can stay up to date with that. All that said, thanks so much for watching this video and I’ll see you in the next one.