Airbnb Is Dead? The New Real Estate Strategy Making 10x More in 2024!

Summary

In 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

00:00

🏠 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.

05:00

💼 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.

10:01

📈 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.

Keywords

💡Real Estate Investing

Real estate investing refers to the process of buying, owning, managing, renting, or selling real estate for profit. In the video, the speaker discusses his experience in real estate, particularly in evaluating undervalued properties, which is a common strategy in the field. The video's theme revolves around a specific real estate deal, showcasing the thought process and decision-making involved in such investments.

💡Underwriting

Underwriting in real estate is the process of evaluating a property's financial potential, including its cash flow, risks, and overall value. The speaker mentions that evaluating properties is 'like second nature' to him, indicating the importance of this skill in real estate investing. The video provides insight into how the speaker underwrites the Myrtle Avenue deal, a key aspect of the investment strategy discussed.

💡Co-living

Co-living is a housing model where individuals share a living space, often with private bedrooms and shared common areas. The video emphasizes co-living as a strategy to maximize cash flow from a property by renting out individual rooms rather than the entire property. The speaker predicts co-living to be a significant trend in the single-family housing market due to affordability concerns.

💡Cash Flow

Cash flow in real estate refers to the net amount of cash generated by a property after all expenses, including mortgage payments, taxes, and maintenance, have been paid. The video discusses how co-living can amplify cash flow, with the speaker providing a detailed breakdown of expected monthly cash flow from the property in question.

💡Property Management

Property management involves the oversight and care of a property, including finding tenants, handling maintenance, and ensuring compliance with rules and regulations. The video mentions the role of a property manager in handling co-living arrangements, emphasizing their importance in managing tenant relations and maintaining a smooth operation.

💡Gross Cash Flow

Gross cash flow is the total income generated by a property before any expenses are deducted. In the video, the speaker calculates the gross cash flow for the property by adding up the expected rents from each room, which is a critical step in determining the property's financial potential.

💡Net Cash Flow

Net cash flow is the income remaining after all expenses, including mortgage payments, taxes, insurance, and maintenance, have been accounted for. The video provides a calculation of net cash flow for the property, which is a key indicator of the investment's profitability.

💡Seller Financing

Seller financing is an arrangement where the property seller provides all or part of the financing for the buyer. In the video, the seller is offering seller financing for her equity in the property, which is a creative financing strategy that allows the buyer to acquire the property with favorable terms.

💡Equity

Equity in real estate refers to the difference between the property's market value and the outstanding mortgage or loan on the property. The video discusses the seller's equity position and how it is being managed through seller financing, highlighting the flexibility in real estate transactions.

💡Permitting

Permitting involves obtaining the necessary approvals and licenses from local authorities to conduct certain activities, such as construction or renovation. The video mentions the need for permits in the context of adding walls to create additional rooms for co-living, which is an important consideration in ensuring the property's legality and compliance with local regulations.

💡Refinance

Refinancing is the process of replacing an existing loan with a new one, typically to achieve better terms or to access equity in the property. The video discusses a potential future refinance as a strategy to pay off the seller's equity and improve the financial structure of the investment.

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