My verdict after 2 years- Short term rental vs long term rental vs more traditional investments

Summary

The video script explores the speaker's journey in real estate investment, weighing the pros and cons of long-term versus short-term rentals. The speaker, initially inexperienced in business, opted for long-term rentals to build skills and confidence. They highlight the importance of choosing unique properties, managing cash flow, and taking a cautious approach in the Midwest real estate market. The video emphasizes the value of learning through smaller projects, like renting out a room or assisting a friend, before diving into larger investments. The speaker invites viewers to share their experiences and perspectives, acknowledging that each individual's approach to real estate may differ.

Takeaways

• 😀 The speaker prioritizes real estate as a unique and enjoyable investment opportunity, especially when targeting special properties rather than typical homes in residential areas.
• 😀 Cash flow is a crucial consideration for the speaker, with a stringent requirement for profit year-over-year, particularly in the Midwest market where appreciation may not be as reliable.
• 😀 The speaker recommends balancing stock investments with real estate, ensuring enough liquidity for real estate purchases without sacrificing stock portfolio growth.
• 😀 Starting with long-term rentals provided a manageable and predictable approach to real estate, especially for someone without a business background or prior experience in real estate.
• 😀 Long-term rentals are perceived as less risky compared to short-term rentals, particularly those located far away, as the upfront investment and management seemed more complex and uncertain.
• 😀 If starting with short-term rentals, the speaker suggests testing the concept by renting out a room in your own home or helping a friend set up their own rental property to gain hands-on experience.
• 😀 Learning by doing was a key theme, with the backyard tiny house project serving as an important learning experience that helped the speaker acquire practical skills before taking on larger projects.
• 😀 The speaker emphasizes the value of understanding the operational aspects of rental properties—like marketing, photographing, and managing bookings—before diving into more complex investments.
• 😀 The speaker recommends starting small and scaling up once foundational skills and confidence are developed, especially in a field like real estate where experience is essential.
• 😀 The speaker's approach combines risk management with an educational mindset, acknowledging that mistakes and failures are part of the learning process in real estate investment.
• 😀 Despite the risks involved, the speaker views real estate investment as a valuable way to build wealth, especially for those looking for tangible assets over time.

Q & A

What is the speaker's primary investment strategy when it comes to real estate?

The speaker's primary investment strategy is focused on long-term rentals, particularly in their local area, as it provides a more predictable and manageable investment compared to short-term rentals or properties located far away.

Why does the speaker place a high importance on cash flow in their real estate investments?

The speaker emphasizes the need for higher cash flow in their real estate investments, particularly because they cannot rely as much on property appreciation, especially in the Midwest market, where they are investing.

What factors did the speaker consider when deciding between short-term and long-term rental properties?

The speaker considered factors like risk, time commitment, and predictability. They chose long-term rentals because it felt more manageable and lower risk compared to short-term rentals, which involved higher upfront costs and the potential for more significant losses.

What lessons did the speaker learn from their first real estate investment?

From their first long-term rental investment, the speaker learned valuable lessons about the real estate process, which gave them the confidence and understanding to pursue larger and more complex investments, including out-of-town properties.

How did the speaker approach learning about short-term rentals before diving into them?

The speaker gained experience with short-term rentals by renting out a room in their own space and assisting a friend with their short-term rental setup. This helped them learn the ins and outs of software, listing descriptions, photography, and marketing.

What does the speaker suggest for people looking to test the waters of short-term rentals?

The speaker suggests renting out a room in one's own home or helping a friend with their short-term rental setup as a way to learn about the process before making a larger investment.

Why did the speaker choose long-term rental properties instead of short-term rentals in the beginning?

The speaker chose long-term rental properties because they felt more predictable, manageable, and had a lower risk. They also preferred the idea of limiting potential losses to transaction costs if something went wrong.

What is the speaker's view on appreciation when it comes to real estate investments?

The speaker is cautious about relying on property appreciation in their real estate investments. They prefer to focus on cash flow and make sure they are receiving a solid return year after year, rather than depending on appreciation.

How does the speaker view the process of scaling up their real estate investments?

The speaker views scaling up their real estate investments as a gradual process. After gaining confidence from their successful long-term rental, they are now considering larger, more complex investments, including out-of-town properties.

How does the speaker differentiate between their approach to real estate investing and their approach to stocks?

The speaker sees stocks as a permanent part of their portfolio but prefers to allocate less to stocks if they are saving up for a real estate investment, so they can have enough liquid cash available for real estate purchases.