Airbnb Is Dead? The New Real Estate Strategy Making 10x More in 2024!
Summary
TLDRIn this video, the host partners with Jack Selby from Ice Coffee Hour on a real estate deal involving a Myrtle Avenue property. They discuss the co-living strategy, which maximizes cash flow by renting individual rooms, and provide a walkthrough of the property. The host explains the financials, including projected cash flow and costs, and addresses potential concerns like tenant conflicts and permitting. The video also covers the seller's situation, financing details, and the potential for future refinancing, offering viewers a comprehensive look into the deal-making process.
Takeaways
- 🤝 The speaker is partnering with Jack Selby from Ice Coffee Hour on a real estate deal involving a property on Myrtle Avenue.
- 🏠 The property is being considered for co-living, a strategy that maximizes cash flow by renting out individual rooms rather than the entire property.
- 📈 Co-living is highlighted as a growing trend in the single-family housing market, especially with the decreasing affordability of housing.
- 💰 The property is expected to generate a gross cash flow of $6,350 per month, with potential net earnings of $2,350 per month after expenses.
- 🛠️ The property requires minimal renovations, mainly the addition of walls and furnishing of rooms, with an estimated cost of $3,000 for the walls and $100 per room for furniture.
- 💼 The speaker emphasizes the importance of having a property manager to handle tenant relations and maintain a peaceful living environment.
- 📋 The property will be operated with permits to ensure legal compliance and to facilitate future sales without issues.
- 💵 The seller, a retired school teacher, is carrying a loan with a low-interest rate and is seller financing her equity at 0% interest for the first year.
- 📈 The deal includes a plan for the property to be refinanced when interest rates drop below 5%, allowing the seller to be paid off without additional investment.
- 🔍 The speaker provides a detailed walkthrough and analysis of the property, demonstrating expertise in evaluating and underwriting real estate deals.
Q & A
Who is Jack Selby and what is his role in the video?
-Jack Selby is a partner in the deal discussed in the video. He is from Ice Coffee Hour and is involved in evaluating and walking through a property as part of the real estate investment strategy.
What is the main strategy discussed for increasing cash flow in single-family properties?
-The main strategy discussed is co-living, which involves renting out each room individually to amplify cash flow typically by a four or five-time margin.
Why is co-living considered a growing sector in the single-family property market?
-Co-living is considered a growing sector because it addresses the decreasing affordability of housing, allowing more people to rent rooms at a lower cost, and it provides a cash flow solution similar to Airbnb in previous years.
What is the average stay duration for tenants in co-living properties according to the video?
-The average stay duration for tenants in co-living properties is about 9 months.
How does the property management handle conflicts among co-living tenants?
-The property management handles conflicts by having tenants sign off on rules and regulations before moving in, and by managing any disputes that arise, with the understanding that non-compliance can lead to eviction.
What are the estimated costs for furnishing a bedroom in the co-living setup?
-The estimated cost for furnishing a bedroom in the co-living setup is about $100 per room.
What is the gross cash flow expected from the property after implementing the co-living strategy?
-The gross cash flow expected from the property after implementing the co-living strategy is $6,350 per month.
What is the net cash flow projected for the property after all expenses, including the mortgage, utilities, and management fees?
-The net cash flow projected for the property after all expenses is approximately $2,350 per month.
Why does the video mention the need for permits when modifying the property for co-living?
-Permits are mentioned as necessary to ensure the property modifications are legally compliant and to avoid potential issues with future sales or neighborhood complaints.
What is the backstory of the property owner, and why is she selling the property?
-The property owner, a retired school teacher, has owned the property for 19 years and is selling due to the difficulty in managing the property and the financial burden it has become, especially after unsuccessful attempts to sell it on the open market.
How does the deal structure benefit both the property owner and the investors?
-The deal structure benefits the property owner by providing her with immediate cash and a plan to pay off her equity over time, while the investors benefit from a property with a good loan rate and the potential for significant cash flow through co-living.
Outlines
🏠 Co-Living Investment Strategy
The speaker partners with Jack Selby from Ice, Coffee Hour on a real estate deal involving a property on Myrtle Avenue. They discuss the co-living strategy, which involves renting out individual rooms to maximize cash flow. The speaker explains the benefits of co-living over traditional single-family rentals, emphasizing the increased affordability for tenants and the potential for higher returns on investment. The property is expected to generate a gross cash flow of $6,350 per month with seven tenants, significantly more than renting to a single family. The speaker also addresses common concerns about co-living, such as tenant compatibility and property management.
💼 Financial Breakdown and Permitting
The financial aspects of the co-living investment are detailed, including the costs of utilities, property management, and other expenses, which total around $44,000 annually. The speaker projects a net income of $2,350 per month after all costs, a significant profit margin. They also discuss the permitting process for the property, explaining the importance of obtaining permits to avoid future issues and to ensure the property's value for potential resale. The costs of furnishing and renovating the property, such as adding drywall and LED lights, are also considered, with an estimate of around $10,000 for furnishing and $3,000 for renovations.
📈 Seller Financing and Exit Strategy
The speaker outlines the seller financing arrangement for the property, which includes a primary mortgage and a home equity line of credit. The seller, a retired school teacher, is unable to manage the property effectively and is looking to sell. The speaker offers to take over the property, providing the seller with a lump sum upfront and seller financing for her equity at 0% interest. The exit strategy involves refinancing the property when interest rates drop below 5%, allowing the seller to be paid out of her equity over time. The speaker emphasizes the importance of this strategy for both parties, as it provides the seller with a guaranteed income and the investor with a profitable property.
Mindmap
Keywords
💡Real Estate Investing
💡Underwriting
💡Co-living
💡Cash Flow
💡Property Management
💡Gross Cash Flow
💡Net Cash Flow
💡Seller Financing
💡Equity
💡Permitting
💡Refinance
Highlights
Partnering with Jack Selby from Ice Coffee Hour on a real estate deal
Walking the property to discuss the game plan for the Myrtle Avenue deal
Evaluating underperforming properties as a natural skill in real estate investing
The importance of in-person walkthroughs for effective communication and gauging understanding
Co-living as a strategy to amplify cash flow in single-family properties
The diminishing cash flow from Airbnb and the shift towards co-living in 2024
Affordability issues driving the growth of co-living in the single-family market
The average tenant stay in co-living properties is 9 months, indicating a stable tenant base
Property management's role in handling resident relations and maintaining property rules
The low incidence of altercations in co-living spaces due to the nature of tenant activities
The financial benefits of co-living over traditional single-family rentals
The costs associated with permits and the strategic reasons for obtaining them
Estimating the costs of furnishing and renovating co-living spaces
The story of the property owner, her challenges with Airbnb, and the decision to sell
Seller financing the equity at 0% interest and the benefits for both parties
The process of stopping foreclosure and the seller's perspective on equity
The contract terms for refinancing the property when interest rates drop below 5%
The detailed walkthrough and Q&A session with Jack Selby to clarify the deal's specifics
Transcripts
in this video I had Jack Selby from ice
coffee hour who I'm partnering with on
this deal flew out we walked the
property and I talked about what the
game plan is here the time I went on ice
coffee hour okay we're doing we're we're
doing a deal together extreme
distraction LLC thank you really
appreciate apprciate it I said Jack I
really want to get you involved in a
deal how about I partner with you on
this Myrtle Avenue deal and I walk you
through it step by step so you know it's
legit at this point in my real estate
investing career evaluating an under
properties is like second nature to me
it's like breathing or putting on a pair
of pants however what I love about doing
a tour or walkr with somebody like Jack
Selby is that I get to watch their
facial expressions in person and see how
good I am at explaining how I underwrote
the deal and so it keeps me sharp keeps
me dialed in and when I have newer
people that really haven't invested and
are just jumping in I can also gauge
whether I'm going too fast or going too
slow if I'm maybe overe explaining
things Etc so it's really fun to get
Jack to come to the house in person
rather than a zoom or a phone call being
in person is a game changer what's great
about this house is you got this is a
bedroom right here mhm right this is
like dedicated unit so this would go 875
bucks a month for this spot right
here then right here is another room for
875 right here really oh yeah the number
one strategy that's slept on right now
is co-living the ability for you to rent
out each room amplifies your cash flow
typically by a four or a five time
margin a lot of people will tell me Pace
man single family properties right now
are really hard to cash flow if I'm not
doing Airbnb first and foremost who the
heck is still doing Airbnb in 2024
nobody in fact most of the people I know
are selling their airbnbs because the
ability to cash flow has gone away but
with co- living you can get that cash
flow like people used to get cash flow
in Airbnb in 2021 2022 co- living is
going to be the number one growing
sector of the single family Marketplace
over the next 15 and 20 years as
affordability continues to go down in
fact look at this right here in my
newspaper everything is doubled costs
have doubled across the board
everything's quadrupled for the last
four years co- living is going to save
our country I truly making that
statement is that big of a deal and
nobody realizes how much more cash you
can make oh so it's kind of like every
people aren't staying in the rooms for
like three months at a time like six
months no the average tenant stays N9
months your average time is 9 9 months
so this is like young professionals
people going to college people who just
got out of college they just got their
first job they're like I can't afford an
apartment because an apartment is like
1,400 1,500 bucks plus utilities plus
Internet so they'll get this plus the
common area um and the kitchen for 875 a
month utilities and internet included
it's
insanely one of the most commonly asked
questions in the co-living investing
space Jack calls out right here what if
they don't get along with the other ten
what a great question the way that my
team currently handles this is number
one we have a property manager the
property manager is not only finding the
residents and filling the property so I
don't have to but they're also managing
them once they're inside the property
once they move into the property they've
already signed off on rules regulations
times that they're allowed to shower
times that they're allowed to utilize
the kitchen there is no common space so
they're not hanging out and watching TV
together most people in the co- living
space are coming to the house sleep
maybe do a little bit of homework and
then they're going to work co-living
properties are not typically houses
where people are hanging out all day
long so the altercations are actually
incredibly surprisingly low and when
they do pop up they've already signed
agreement saying that I will get kicked
out if I'm not agreeable with the other
residents and I'm not the one that deals
with that the property manager is and
that's why we pay that this room stays
like common room right are you going to
have to put a wall up in yeah we'll
close that one up okay then I would do I
wonder where for the door I would cuz
you have close that up as well correct
and I would probably put the door to
this room here yeah right so like maybe
literally right here so we can put a bed
up against this liability as well if
someone gets injured is that insurance I
have insurance on every property um okay
so and you tell your insurance company
what you're doing with the property and
they they underwrite it for that
specific exit strategy so like co-
living they have a specific uh rider for
that this is another room so another 875
one
two
bedrooms
three four and what's great about this
no carpet anywhere it's already done so
that's four five four five six so we got
six bedrooms and the only thing youd
have to do is throw a a couple of walls
she's get uh letting me have all the
furniture like taking everything all
right this all sounds great but what are
the numbers and how much money are we
going to make based on the fact that
we're Partners so we're going to have
seven people in this property one of
them is going to get the big bedroom
with the dedicated bathroom so they're
going to pay a little bit more money
then we've got six people renting out
each individual room at 875 on average
per month that adds up to
5,250 bucks so you put these together
right we're at
6,350 bucks is basically the number
sorry
$6,350 per month that is our gross cash
flow now we've got a payment we've got
utilities we've got some management fees
all in all all of that's going to cost
us I'd say about $44,000 now why is it
$4,000 I've got a payment to the Myrtle
sub2 deal I've got utilities internet
Landscape Maintenance Cleaning the
property management fees Etc totaling
about $4,000 all in that includes
vacancy that includes somebody breaking
a window so Jack and I should walk away
with about
$2,350 per month
on this property that's kind of insane
$2,350 per month if you think about this
that's how much I would be able to rent
it out for if I just rented it out to
one family so being able to put seven
people in the house makes me net
$2,350 per month rather than rent it out
for 2,350 bucks and lose money on the
cash flow co- living solves all of the
non-cash fling issues in the single
family World okay what about permitting
okay we would get a permit for this
would not get a permit for the walls
inside the house this would get a permit
and the reason why I would get a permit
for this is a couple of reasons one if I
resell this my buyer is going to have an
appraiser make sure that the property is
appraised that whatever they're getting
a loan for yeah I will also get a a
permit because somebody in the
neighborhood will call and you'll get
trouble so you just want to avoid that
permits are 500 bucks takes about two
weeks for something this small I'm not
building a house I'm just I'm trenching
over and adding a to and how much would
it cost to put up
the drywall let's go take a look real
that needs to be furnished with a bed
and so does that the average cost of
furnish a bedroom is about 1,00 bucks so
$3,600 for those two probably another
$4,000 for the drywall and the paint and
then another $3,000 for the LED lights
i' probably say to be crazy Ultra
conservative you're going to spend
20 if all I wanted to do is just throw
up the walls and the drywall and paint
it I'm probably 3,000 bucks but I don't
want to do that I want to do that
I also could be like hey you know I can
rent it out with couches in it and I
could be a freaking stingy weirdo or I
could go to like the Goodwill and buy a
$100 bed but you want to have your
tenants have something really really
nice and you want them to stay long
there okay so here's the story of you so
cherylyn owner of the property bought
the property back in 2005 so she's owned
this property 19 years so the loan that
we're buying sub two is 19 years old
which means there's like basically all
the interest has been paid it's
basically princip
home the reason she owes so much is
because she has a primary mortgage for
like 200 something like that and she has
a home equity line of credits in second
lean position why because she pulled
money out on a home equity line she
hired a contractor that basically just
worked her to the Bone took every last
penny she had and by the time this is
200 like 2020 2021 it took forever it
she was hemorrhaging as a retired school
teacher she finally got it up and going
on Airbnb and it barely covers like her
living expenses wow she just doesn't
have the Fulfillment she's not an Airbnb
person yeah right like if you go on
Airbnb and I go on Airbnb who's going to
make more money right now based on our
skill yeah right like if you do it for
three or four years you'll catch up to
me she's only been doing it for a year
so Airbnb Chang changes the algorithm
all the time like how they're judging
you and how this and how frequently you
update your pictures and blah blah blah
blah blah
and so you have to be really good at
marketing even on the Airbnb platform
she's not good so it's she's bringing in
enough money that it covers the mortgage
plus she makes $1,000 a month and she's
like that's not enough for me to live I
just need to sell this property and I
need to move on I don't it takes up my
whole life to manage this so we are
taking over a really good like 3% rate
loan with no more a little bit of
Interest not much and then the second
position um her equity in the deal
we
are she seller financing her Equity to
us for 0% so she pulled an home equity
line of credit out she paid that off and
we're taking her Equity over at 0%
interest she's giving us no payments on
it for the first
year after 12 months she's charging us
500 bucks a month so at that point we
would have that Pro that room going up
and going making 1,100 bucks a month and
that would pay for 500 bucks plus we'
make an extra $600 net why would she not
just sell it on the open market she Tri
but she couldn't get the price she
wanted the rates as well it's both it's
she couldn't get the price she wanted
because of the rates right she has an
she has an agent that just couldn't get
the job done and so she ended up calling
us off of our SEO like she ended up
calling our office saying hey I've an
impossible situation yeah my agent can't
sell it I'm hemorrhaging money I make oh
and so here's what's going on she
decides I'm going to sell the property
so what does she stop she stops
marketing under your VB so now she has
no more income she's on a fixed income
so now what's happening with the
payments she's behind so now she's in
foreclosure two months we're catching up
her foreclosure stopping her from having
to lose the house and losing all her
Equity um or her perceived Equity a lot
of times sellers don't have Equity but I
allow them to keep Equity does that make
sense M well she wouldn't have any
Equity if she for close right well even
if she sold on on the marketplace she
doesn't she doesn't have any equ why did
you say that well she couldn't sell it
oh true right so like the number she she
tried to sell on the market was enough
to get her her on the technically like
on the note she has principal payments
on paper she has it shows that she has
Equity but if somebody bought on the
traditional Market she'd have to pay
agents and she'd have nothing yeah so
what we do is I go to a girl like her
and I go hey
sherlyn I know you don't have any real
equity in this thing really like at the
end of the day because nobody's willing
to buy it what number do you want and
I'll make sure you get Equity out the
deal she just wants that she mentally
like people people that haven't done
would I do like doing this is like
putting on a pair of pants for me doing
this she's like what would I have to do
I'm like nothing shair I just want to
take care of it she's like that seems
too good to be true I'm like it is
nobody else is going to give that to you
she's like why would you do that I'm
like I don't need more money I don't
need more deals I just love doing this
it's like a fun game for us and I'd love
to I have this whole like seller called
um recorded and she's like I actually
sat down right here and this is where I
walked in the deal at the appointment
the appointment and she's like so you
would partner with me well yeah you make
a lot more money long term like just let
me do no money now and I'll I'll pay you
monthly fees and she's like no I just
want just give me $10,000 and I'm going
to walk away so we're giving her 10
grand up front I think I got to look it
up it might be five grand Molly would
know so she's getting some money up
front and then she gets no payments
until 12 months and then she starts
receiving payments for a couple years
until we wipe her all the way out mhm of
the equity that she has on the Note
correct yeah and so what she would do
what we would do is like in the contract
I told her that when interest rates go
below 5% and the house appraises for
what we can refinance with no man pocket
like like that's literally written in
the contract when the interest rates go
below 5% to a point that we can
refinance without putting more money
into the property we will refinance out
your Equity so that could go on for
three years that could go on for five
years that could happen in six months I
don't know it's not going to happen six
months you know what I'm saying all
right so we've done the walkth through
we broke this thing down for Jack Selby
you saw the question he had I answered
those and at this point I'd probably be
asking the question of like how does
this get done start to finish what are
the specific numbers can I see this all
mapped out on one big whiteboard that's
where I'd be that's the question I'd be
asking and if that's you click the link
on the video right now and go over the
video where I broke this all down I I
dissected this entire deal for the
people that love the magic whiteboard in
the pen I mapped it all out guys go and
watch that video right now
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