Airbnb – Let’s start with why you would want to start an Airbnb business and run this strategy. For us its two fold.
The first is automation & the second is financial reward.
We love automation as it lowers our admin time and increases our financial returns.
In effect, we are getting paid more to do less and that is a business mantra we like.
Whilst this blog post won’t dive into the How To’s of automation, check out https://airstays.io/ for more information on a done-for-you automation service, or https://zatraining.co.za/courses-page/airbnb/ for a training course on how to do this.
Why start an Airbnb business
The biggest draw card of Airbnbs of course is the financial returns.
Daily rates outcompete monthly rates and monthly rates outcompete yearly rates.
So if you can rent a property for an entire year, and then rent it back out on a daily basis, your financial returns will be much higher.
If you choose not to use the Rent-to-Rent model, and instead prefer to buy, you’ll also benefit from the long-term equity growth in addition to the monthly cash flow.
This is a win-win!
Consider this Airbnb property: a case study
Let’s look at a very small example in a town that has a population of roughly 600 000 and is not considered a major financial hub.
It’s in a town called Bloemfontein about 4 hours’ drive from Johannesburg, and 10 hours’ drive from Cape Town.
We purchased the unit for R350 000 furnished and we could rent it out for about R5000 a month on a standard month-to-month lease.
That results in a 17% yield.
But, by the time you take expenses into account, on a single monthly rental you would lose money each month. This certainly makes it a poor investment!
But, when we Airbnb it, we earn +/-R7 000 a month income in the quieter months, and in a good month we earn R12 000 per month income.
Oddly enough, September and January are the two quietest months in Bloemfontein. January because businesses are closed for half the month going into the New Year, and September… Well, we don’t actually know why that is. It’s just a quiet month each year and we account for that.
As can be seen, in a good month we are getting R5K in pure profit resulting in a 40% yield.
This is 23% more than a standard single lease, is cash flow positive and makes it a good investment!
At the same time, we are in process of refinancing this unit to get more money out of it to repay our investors.
At that point another benefit kicks in and ROI on this moves into infinite return. We have no money in the deal, and we get paid from it.
Head to my investing page and sign up if you’d like to learn more about this strategy
How to run an Airbnb without owning property?
So how do we find these properties?
The easiest way to do this is to go to a portal like https://www.property24.com and look for properties in your price range and area.
You can either buy or rent in this strategy, with the Rent2Rent model lowering the barrier to entry on costs. And if you can find a furnished unit, even better!
How do you analyse a property for Airbnb?
While there are toolsets to help with more in-depth analysis of units, it is not a requirement.
Simply head over to Airbnb.com and search the area for similar-sized properties. Once you get a feel for the daily rates you can do some simple mathematics.
If an average daily rate for a unit is $100, multiply that by 31 days and you get $3100 at full occupancy. For 15 days it’s $1550 at 50% occupancy and so on.
To get an idea of occupancies, check out a few properties on Airbnb.com and see what dates are available that month. Do this for a few weeks to a month and you will quickly get a feel of the rental occupancies.
You’ll now need to get to your expenses and you can use the sheet found here to help with a list of costs to expect including cleaning, maintenance and Airbnb platform hosting costs – https://zahomes.co.za/work-with-us/sell-properties-to-us/.
Income minus expenses results in your final profit.
Whilst all of that looks simple, there is more to it, so if you are looking for a bit more of a quantifiable method to this, watch my business partner Jacques du Toit as he breaks this down.