Kyle Stanley aka The Fearless Investor is a real estate entrepreneur who specializes in Airbnb. In less than two years, he scaled his Airbnb business to seven figures, all without owning any of the properties he lists on there. So it’s 2022. Real estate prices continue to climb, as do rents. The big question: is Airbnb still worth it? Well, it’s crazy, Covid hit, everyone thought the real estate market would crash, and yet, the opposite happened throughout most of the U.S.
“And before we knew it,” Kyle says, “Airbnb was not being affected that much, but, as an investor, as someone who’s looking to buy a house, it became this big question of like, ‘Man, is Airbnb really worth it?’ I was actually just looking on a website the other day and they said that the nationwide rent went up nine-point-six percent in the last year. And as I dove even deeper, I found out that real estate prices nationwide have gone up sixteen-point-two percent since 2020.”
The good news? If you look at property analysis tools, like on AirDNA, for example, you’ll see that nightly rates on Airbnb have also gone up over the last year. So yeah, the profit potential’s still there. That said, Kyle has five things you need to consider before pursuing an Airbnb business here in 2022. First and foremost, is it even legal where you live (or where you’re looking to do it in)? There’s a lot of short-term rental ordinances both coming into effect and being lifted, so you really gotta stay on top of it.
Second, you gotta get your hands dirty with market analysis. Again, use software and tools and calculators (just Google ’em) that are out there to determine if the numbers even make sense. What might your nightly rate be? Occupancy? Net profit after all expenses are paid? Not knowing these things, and just going in blind and hoping for the best? Yeah, that’s a great way to lose tens of thousands of dollars with your Airbnb business.
Next, number three, is risk factors. “For me, you wanna have a three-to-one short-term to long-term gross revenue,” Kyle explains. “So, keeping it really simple, if you had a place that you could rent out as a long-term rental for a thousand bucks a month, then as a short-term rental, you wanna be as close to three thousand dollars as an estimate for your monthly rent. That three-X number helps you pay off all the furniture and initial expenses, but it’s also gonna reduce your risk by making that much more money.”
“The other part of the risk factor,” Kyle continues, “is are you making thirty-three percent margins? That’s my number that I like to look at, and it tells me whether or not this is a risky deal or not. So you’re netting a thousand dollars off of a gross of three thousand. Why that’s important, why you wanna be at thirty-three percent or higher is, that just means you’re breaking even earlier in the month. What if another Covid happens? What if you have a slow season? What if you have to shut it down for a week for maintenance, right? It’s just too risky if your margins are any thinner than that.”
Four, do you have a backup plan? Can you turn the place into a long-term rental if Airbnb doesn’t work out? And, say you bought the place, and your mortgage is a grand a month; well, you better be able to find a long-term tenant who can pay at least that much, if not more, so you’re at least breaking even each month (while the equity builds). Fifth and final? Can you do a value-add to the property? For instance, is there a detached garage you could turn into an extra room, to squeeze more cash flow from the property? Depending on your answers, Airbnb might still be worth it in 2022.
