What’s a Good Price to Buy Your First Airbnb?

(00:00) depending on the market you get started in you can buy real estate for anywhere from1 or $200,000 up to tens of millions of dollars really but the big question is which types of properties are actually going to give you the best return when you’re getting started investing in short-term rentals and what should an ideal price range be for that first property surely there must be some properties that are too small to bother and others might be too expensive to really be worth it so that’s a question I get asked pretty often what price
(00:31) should I spend should I pay for my first property and although there isn’t one specific answer to this and obviously it depends on the level of profit that you want from the property uh it depends on how much money you have and you can have properties at various different price ranges that will perform well there is generally a range that I recommend to people and so in this video I’m going to share with you my thoughts on a good starting range for your first short-term rental property as an investment and I’m
(00:58) going to share with you some different C to it where you can find these different properties and ultimately just why I think that this kind of range is ideal so let’s jump right into it what I find to be the ideal range for purchasing your first short-term rental property is generally going to be anywhere from $300 to about $800,000 now the reason that I have this is kind of the ideal range is for a couple reasons on the low end if you’re buying a property that is under $300,000 you just have to be aware of
(01:35) the fact that even if you get a good return on a percentage basis meaning your cash on cash percentage is good it’s within kpi it’s exactly where it should be the actual absolute dollars of that are going to be relatively minimal you have to remember even if you’re buying a small property that performs well you’re not actually going to make that much money in terms of abolute dollars and cents on that property so it likely just isn’t going to be that worthwhile for your time the other thing
(02:06) you have to consider is that all else being equal if you’re earning 15% on a $500,000 property or 15% on a $100,000 property for your cash on cash return you’re going to spend just as much time and effort relatively speaking to manage that $500,000 properties you would the $100,000 one and you’re going to make about five times more so it’s really just kind of makes sense to go and invest in a larger property to a certain extent so that’s why I have the kind of lower end of the range there it’s not to
(02:39) say that you should never buy a property that’s $100,000 or $200,000 if you want to to get started and that’s what you have the budget for you can absolutely do it you can find good deals that will give you good returns at those lower price points you just want to be mindful that as you grow you may want to start looking at more expensive properties that are going to give you a better payoff for the amount of effort that you’re putting in now what about the top end why not just go buy a one or two or
(03:02) $3 million property the reason for this is that generally speaking if you’re going and spending more than $800,000 on a property and in some areas it’ll be more than 900 more than a million some areas it’ll be if you’re spending more than $500,000 you’re going to be getting into one of two categories either more high-end luxury Properties or multi-unit properties now I have some problems with both of those categories for firsttime investor especially luxury properties tend to be the properties that get hit
(03:34) the hardest in economic downturns the reason being that the people that are spending 500$ 800,000 $2,000 a night to stay at a property typically are willing to pull that back and spend a little bit less so you see that when we go into a bit of recession or an economic downturn you’ll start to see those luxury properties don’t do as well they tend to drop pretty significantly in performance whereas those mid-range kind of more average average properties more maybe on the upscale side of average tend to
(04:04) perform pretty consistently because the people that are downgrading from higher quality properties are going to go in there you’re still going to have enough people booking those properties that they tend to stay pretty consistent so there’s just less volatility and less risk with a more average or upscale side of average property as opposed to a very high-end property then if we look at multif Family Properties they can actually be fantastic in fact I recommend them for a lot of people a lot of situations they can be really great
(04:32) for short-term rental however if you’re getting into your first short-term rental property you may be looking and biting off a little bit more than you can chew you’re likely going to be getting into commercial lending at that point so you’re probably going to have to put more money down it can be a little bit harder to really get the good returns that you’re wanting so it can be a really really good strategy but not my favorite strategy for the firsttime investor are you a brand new or experienc Airbnb host co-host or
(05:02) investor who wants to host as successfully as profitably and with as much fun as possible if so then I would love to invite you to check out BNB tribe Linked In the description down below this video it’s our exclusive Community for Airbnb hosts investors and co-hosts from all over the world where I share some of my best trainings that go into detail on every single aspect of Airbnb hosting from A to Z we you’ve got Advanced Training playbooks that will help you to use more advanced strategies to take things to the next level and
(05:35) make more money and have more fun hosting co-hosting or investing on Airbnb you’re also going to get access to an incredible community and over $2500 worth of deals perks discounts bonuses that I’ve negotiated with other vendors in the short-term rental industry so if you want access to all of that and a whole bunch more check out the link in the description down below for B&B tribe and I would love to see you on the inside what do you want to look for within that range cuz obviously it’s a big range you can go 300,000 you
(06:06) can go 800,000 there’s a lot of variance there and ultimately that’s going to come down to the budget you have how much you’re able to borrow from any lender that you’re working with and there various different lending options available when you’re investing in short-term rentals um and you’re also going to want to look at things like do you want to renovate that property do you want to buy something relatively TurnKey if you’re going to be renovating the property you need to make sure that
(06:28) you set aside cash for that renovation that you’re now not going to be able to use for the down payment on the property you also want to make sure you have budget for furniture you want to make sure that financially you’re going to be in a comfortable place investing into that property you also want to look at what the going rate is for properties in a given market so for example if you’re in a market where most properties are in the three4 $500,000 range then you might be going into really high-end luxury
(06:54) properties when you’re at 600 700 $800,000 so you want to stay again it’s more so about the type of property you’re staying at and also the nightly rates you have to charge in order to get a good return on that investment if you’re going to be charging really premium nightly rates for that area then you may want to shy away from that because it just could be more volatile it’s not to say you don’t want to buy a property that you can charge good nightly rates for and healthy premium nightly rates for it is just to say that
(07:21) if you have to be getting those really premium nightly rates in order to just break even and make ends meet then you may want to reconsider in terms terms of what to look for there’s lots to consider when buying a short-term rental property it’s a lot more than just the price you have to look at ultimately the amount of Revenue you’re going to be getting on that property relative to the purchase price you’re paying for it so like any good real estate investor we’re always looking for a good deal on the
(07:45) property we’re buying but there’s a slightly different lens that we’re looking at the deal through than other people might be looking at ultimately yeah we want to get a great deal on the property buy something for less than what it’s worth maybe have some potential to increase the value of it but ultimately we want to buy the most income potential I highly recommend that any new investor start thinking about the property they’re purchasing as an income stream if I can buy a $100,000 income stream for $500,000 versus paying
(08:14) $400,000 for that same income stream I would much rather pay less for the income stream because that’s going to get me a better return on my investment so there’s all these different factors you’ll want to consider in order to make that decision from looking at airdna data to looking at comparable properties to assessing what amenities you might want to add where the location of the property is there’s all kinds of things that go into making that decision and ultimately again I just want to stress
(08:38) that it’s not to say there’s really one single right answer to the price you should pay for a property and certainly not every property in that $300 to $800,000 range is a good investment most of them are not good Investments for short-term rental but all else being equal if you do your due diligence you find a really good property I generally recommend spending within that range to make sure that you’re getting a good return of your time and not taking on too much risk I want to know your thoughts as well that’s in my experience
(09:06) and experience with the investors we worked with if you have thoughts comments questions let me know in the in the comment section down below if you want to learn from me you want to learn more in- depth how to analyze deals how to find the right markets all that stuff check out our training resources in the links in the description down below I’d love to work with you in there um and like the video make sure you hit the like button it really helps you out with growing this channel getting these videos in front of more people make sure
(09:27) you subscribe as well if you’re new to the channel here we do Post two new videos every single week uh on Tuesdays and Thursdays so subscribe to the channel and turn on that notification Bell it’ll alert you so you can stay up to date and make sure you check out the videos when they launch all that being said thank you so much for watching this video and I’ll see you in the next [Music] one