BiggerPockets Real Estate Podcast - 793: How to Analyze a Rental Property as a COMPLETE Beginner

Episode Date: July 18, 2023

Don’t know how to analyze a rental property? After this episode, you’ll be a rental property analysis pro, knowing exactly how much money you’ll make on your first, second, or next real estate investment. But don’t worry; you won’t need any complex formulas, dense spreadsheets, or complicated math to calculate how much cash flow you’ll collect from your real estate deal. Instead, you can use the EXACT methods we show to analyze investment properties in minutes, EVEN if you’re a real estate rookie! Wait? Did David and Rob morph into the queen of upstate real estate, Ashley Kehr, and short-term rental/skincare expert, Tony Robinson? Fortunately, David and Rob are safe and sound, and in this episode, Ashley and Tony from the Real Estate Rookie podcast will teach you EXACTLY how to analyze real estate deals in 2023. From long-term to short-term rentals, BRRRR properties, and choosing your real estate market, Ashley and Tony will go through everything you need to ensure your first or next real estate deal is a home run. Our hosts will go step-by-step through analyzing a real estate investing market, signs of one you should invest in, building your “buy box,” analyzing a long-term, short-term, and BRRRR investment property, and how the 2023 housing market has changed. If you’re still waiting to get a rental property under contract, this is the place to start! In This Episode We Cover: How to analyze a rental property, short-term rental, or BRRRR investment from scratch  2023 housing market updates and what you MUST know before buying  Using the BiggerPockets rental property calculators to analyze properties in minutes Where to find insurance prices, property taxes, and other KEY variables  The three things you MUST know before analyzing an Airbnb or vacation rental  Financing your real estate deal and rental property loans you can use to purchase an investment property!  And So Much More! Links from the Show Find an Agent Find a Lender BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch BPCON2023 Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area Ask David Your Real Estate Investing Question Ashley's BiggerPockets Profile Ashley's Instagram Tony's BiggerPockets Profile Tony's Instagram BiggerPockets Calculators Used in This Episode: Rental Property BRRRR Rent Estimator Tune into The “Real Estate Rookie” Podcast: Podcast YouTube Grab Tony’s Short-Term Rental Calculator BrightInvestor NeighborhoodScout Policygenius PriceLabs Propstream Investor Shout-Outs: Amy Mahjoory Lattes and Leases Zosia Madden (Rookie Ep 301) Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-793 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Real Estate Rook. Oh, wait. Tony, this is a takeover. We're on the Real Estate Podcast episode number 793. Before you even think about your market, think about what your goals are as a real estate investor. If your goal is to leave your job as fast as humanly possible, appreciation itself isn't really going to help me. Tax benefits per se aren't really going to help you as much, right? You want cash flow. You want profits. So I think think about what your goal is what your strategy is and that kind of helps you identify what market you should be going into what strategy you should be going into my name is ashley care and i'm here with my co-host tony robinson and we're super excited to be taking over the feed today because ash and i feel like

we're getting called to the to the big leagues a little bit uh but i guess we can start with a little quick tip or i think i think david green does it with like a like a batman voice now he goes like quick tip or something like that anyway um quick tip for it today If you guys aren't yet aware, BiggerPockets has a bunch of free resources and premium resources as well. But you can sign up for free at Bigger Pockets and you get five calculator uses to help you analyze deals, which ties in perfectly with today's episode about deal analysis. And if you're a premium member, if you're a Bigger Pockets Pro member, you get unlimited

calculator uses. So make sure to check those out. And then I guess like it's the second quick tip, for those you that don't know me and Ashley, make sure to connect with this on social. I'm at Tony J. Robinson on Instagram. She's at Walth for Rentals. If you guys want to keep up with us after this podcast episode ends. And we are the co-hosts of the Real Estate Rookie Podcast.

So if you want to get back to basics and fundamentals and build that strong foundation for real estate investing, then make sure you check out our podcast or send some of your friends, family, colleagues over to the real estate rookie. We really focus on beginners investing and really getting that first deal and working up to your next deal. So we have a lot of guests that have less than 10 deals on and they're so fresh in being a rookie investor that they are a wealth of knowledge as to how they've overcome their mindset, how they've taken action, what are the exact steps they took to get to their first deal. So if you know somebody who could take advantage of listening to our podcast and give

them that little bit of inspiration and motivation they need to get their first real estate deal, please send them over to the real estate rookie. We're also on YouTube at Real Estate Rookie, and we are going to do a screen share when we do a deal analysis for you guys. And if you are more of a visual learner and you would love to look at the actual calculator reports that we're sharing for you guys, go on over to YouTube, Real Estate Rookie on YouTube, bigger pockets on YouTube. and you'll be able to watch this video and learn along with us. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast?

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Okay, so Tony, let's get into some. deal analysis. I'm super excited to talk about this because I feel like it's honestly one of the most important things that people need to understand as they're getting into their real estate journey, but it's probably a set of mostly but don't spend enough time really getting good at. So I'm excited to dive into today's content. And I think that it can change too. So just because you're an expert at analyzing a single family property does not mean that you're also an expert at analyzing a duplex. There are so many different things compared to the property type of what you are analyzing, but also market-specific, too. For example, if you're in Florida, you may have to account for hurricane insurance.

If you're in a flood zone, you may have to account for flood insurance, depending what the city taxes are. So for a short-term rental, you may have to account for some kind of permit to actually operate a short-term rental. So there's a lot of different things that are specific to your market, to your property when it comes to analyzing a deal. And our best advice, I would say, to a rookie investor is stick to one market and stick to one property type and get really, really good at analyzing that one specific niche and then go out and branch out and analyze other deals and other markets and things like that. So as much as we would love to analyze deals for you guys all very specific. specifically and tell you exactly how to analyze the deal in your neighborhood. We are going to do some examples of what we are currently investing in. Tony has a flip property that he's going to talk about how he analyzes it.

And then I'm going to talk about a single family house and how to analyze it in one of the markets I invest in. So first, Tony, before we actually get into the deals, do you want to kind of do like a breakdown of the process of analyzing? a deal. Yeah, absolutely. And I think before I even talk about the process, Ash, I want to, I want to share with all of the listeners that you don't necessarily have to be a quote-unquote numbers person to get good at analyzing deals as a real estate investor. The beautiful thing here is that regardless of how, you know, tech savvy or Excel savvy you are, if you hated math

in high school or whatever it is, you can still get good at analyzing properties as a short-term as a flip, as a burr, as whatever it is, because there's a proven set of steps you need to follow. So as long as you can follow directions, you should be able to get at least decent at analyzing properties with whatever strategy it is that you're using. And even if you don't like to use in Excel, right, that's a totally free tool. But bigger pockets obviously has a bunch of calculators as you can use to help automate this process as well. So as long as you can punch numbers on your keypad on your keyboard, then you should be able to analyze deals as well. So I just want to start with that first. Like that's, that's the important thing. I want you guys to understand that regardless of, you know, whether you're a freak in the,

in the spreadsheets or, or maybe, maybe not, you can still get, still get good at this. So I lost some train of thought. What the heck did you ask me to do before I went off on to that tangent? I didn't ask you to do anything.

So that was perfect, Tony. But I wanted to talk about, what are some of the steps in analyzing a deal? Like some of the things you should think about before actually getting into the numbers. So, the first thing is, where are you going to invite?

in and doing the market analysis of figuring out if this is actually an area that's going to benefit your Y for investing in real estate. So if you're somebody who's maybe looking for long-term play, you don't really need cash flow right now. You love your job. You want to stay in your W-2, but you don't have any retirement, maybe set up. And so you want properties that are going to appreciate so you can tap into that equity down the road and you can pull that out for your retirement. So in that scenario, maybe a market with minimal cash flow, but high chance of appreciation is going to be a better play for you than somebody

was like, I want to get out of my job now. So I need cash flow right now. I need high cash flow. I don't care that much about appreciation because I want money now. And then there's people who care about both. They want both of those things. So definitely picking. your market is one of the first steps and really focusing in and honing on that because

markets are so different that it will make you lose focus if you are trying to analyze deals in five different markets across the country. So as a new investor or even as an experienced investor, don't try and go to 10 different markets at once. Get really good at one market for whatever strategy you're doing, then branch out and use your skill set to continuously to analyze markets and then go into those points. Yeah, I think even like, I love what you just said. I think it's a super important point, but I think even taking one step back and this kind of ties into what you said initially. But before you even think about your market, think about what your goals are as a real estate investor because that's going to play a big factor in how you make some of

those subsequent decisions. So you talk to Ash about like, you know, are you focused on cash flow today? or you focus on tax benefit. If your goal is to leave your job as fast as humanly possible, then appreciation itself isn't really going to help you today. Appreciation is a long-term play. If your goal is to quit your job today, tax benefits per se aren't really going to help you as much, right? You want cash flow, you want profits.

So I think think about what your goal is, what your strategy is, and that kind of helps you identify what market you should be going into, what strategy you should be going into, you because you got to identify which one supports your goal because I you know I we we are in a very fortunate position as we get to talk to people from all different walks of life different stages in their real estate investing career and I hear some folks who say Tony you know actually ash we were in Denver just a couple weeks ago and we were sitting with neb who's a doctor um neb actually we met at BP con last year and he won this raffle to hang out with me nationally for a day at bigger pocket

headquarters and uh neb's a doctor and you know obviously doctors have you know high incomes and a big goal for NEP was, okay, how do I offset my W2 income with the passive losses that real estate can provide? So a lot of his real estate investing strategy was focused on that piece. So as he's looking for properties, he's not going to necessarily be able to look in markets where price points and land value and property value are super low because that doesn't support his goal of getting the cost benefits. He's going to have to go into markets where the property values are a little bit higher and he can get the benefit of like a cost segregation study. Whereas, you know, say someone who said, I want to quit my job

tomorrow, they've got to go out and focus, okay, where can I get maybe some good bird deals? Where can I get good cash flow with minimal cash outlay? So I think a lot of that kind of ties into it. But, Ash, once you, once you've kind of decided on a market, and I think both of you and I are unique in this approach because we kind of had different approaches to this. But when you kind of start to narrow down on your market, are there any indicators you're looking for inside of that market to say, okay, yes, this is a good place for me to start analyzing deals. Yeah, so I started out just close to home because this was the market I knew because I grew up there and I also worked for another investor and I knew the market.

There's been two times that I've kind of went out of my comfort zone into the city, not the rural areas. And those were both on a real estate agent's recommendation and actually the same one. And so I would listen. to everything that she said about those neighborhoods. And then I went and did my own research to kind of verify that. So some of the tools I use for that are Neighborhood Scout and then also Bright Investor. So those are two pieces of software where you can pull up so much market data that I used to go to like city data.

dot org and all these different websites to find everything that I wanted, you know, a crime website. But now there's so many programs that have it all tied together that save you so much time and have all the information you need. So Bright Investor is a newer one, but you can go on there and just like pull all of the data that you need to analyze a market. They basically do all the work for you. And that is where I'm looking at, okay, what is the job growth? as to what has been in the last couple years and what is the potential. Then I'm also looking at the population growth. Are people moving there?

Are they moving away from there? I'm also looking at what are the demographics as far as age? And if you see, you know, there's a lot of kids. Like, it's more of a family neighborhood where if I'm looking at a five-bedroom house, I may not want to go into an area that has a lot of single people that are unmarried, you know, maybe 30 to 40s where maybe they're out of that period where they're in their 20s and don't want to live with roommates. But so just looking at all these different variables that come into play when looking at the

market. But then also, you know, what's the price to rent ratio? What's the average cost of living? what is the average income, all of these different things that you can pull and look at the market. And then you have to take all of that information and tie it into your investing strategy. So if I'm analyzing for a short term rental, it's going to be very different data and stats that I want from that market analysis compared to if I'm looking for a long-term buy and hold play in this market. Yeah, so many good points there, actually. But one thing I want to call out that I thought was super important, you said you started off kind of investing in your backyard because that's what you knew, but you also supported that decision with data.

And I think that's the step that a lot of people miss. There's nothing wrong with saying, I know this market. So I'm going to invest here because I'm comfortable and familiar with it. But you have to take a one step further and make sure that it actually makes sense to invest in that market. You know, a lot of what we do is in the short term rental space. and I've seen some folks get just absolutely hammered on deals because they invested in markets that they knew, but they didn't take that secondary step of supporting that decision with data. They said, I love going to Maui, so I'm going to buy a condo in Maui.

I love vacationing at the beaches in Florida. So I'm going to buy a beachfront property in Florida. I love going to, you know, name the place, name the state. And they say, I like going there. Therefore, it must be a good investment. But that is not true whatsoever. You can use that as your first step, but you still want to make sure that. that you take that secondary step of supporting it with data.

And I think what you talked about, Ash, about using those websites is a kind of a great place to go. And again, obviously, the strategy that you use is also going to dictate some of the data that you need to pull. We'll talk a little bit about the flips and short-term rentals that we do. But like, I want to make sure that the data specific to the asset class that I'm focusing on to the strategy that I'm focusing on supports that next step there. So when I think a little bit, Ash, about like, where people get, where people get hung up

on analyzing deals. First, I think, is where to pull the data from. And I think you gave some great resources there. Bigger pockets, actually, as you're going through the calculator tools, they also kind of give you hints on where you can pull some of this information. So if you guys go to bigger pockets, look at the tools, find the calculator for whatever strategy it is you're trying to use. I think that's a great starting point to help you get over that initial hump of what data

do I need and where should I be pulling that data? Because BP literally guides you through that process. I think the second. thing that people get caught up on is how do I know if I'm doing it the right way, right? How do I know if I'm missing anything? Because you see a lot of investors who, let's say like a long-term rental, for example, they might understand, okay, cool, here's a property that I'm looking at purchasing. Here's a comparable property for rent. Maybe it's running for whatever, $2,000 a month, but they forget that they need to include things like CAPEX or maintenance

and repairs. So again, I think if you use a tool that is built to help kind of fill in some of those gaps, it becomes easier to have confidence just going through those steps. So literally the first deal that I ever analyzed, actually the first multiple deals ever analyzed, I did them all with the BP calculators because you can't move forward without filling in all of that required information. I felt like it was super helpful for me. Tony, let's run on to like now the actual deal, what your investment strategy is. So you've kind of got your market analysis. You know where you're pulling your data from. But you have to pull the data for the actual property, too, such as What are the property taxes? How do I estimate insurance? Are there, you know, any zoning, you know,

requirements I need to know about? Are short-term rentals allowed here? What are the rules and regulations of the city? So pulling all of that information, that can actually be a bit of legwork if you've never invested in that market before. You don't really know anything about it. So when you're doing the actual deal analysis, you want to know what strategy you're going for. So you want to have your buy-bop. with your property type, your strategy, are there like definite noes for you? Like I don't want a house with a pool. And one of the reasons may be

because your insurance premium may be higher if you have a pool and you have renters in the place. So going through your buybox, what is your max purchase price that you are looking to buy at in that market? So going through and making this list will definitely help you expedite analyzing deals because you can go through and go ahead

and just like check like, nope, this property did not meet this criteria or yes, it does, yes, it does. Okay, now I'm actually going to dive deeper into the analysis part of the deal. And one thing with doing that is like you also stay focused and you stay specific on what you're trying to do. And one thing I will go over in the deal that I analyze for you guys is that I'm focused on one strategy, but with how the way the market is, I am also analyzing deals based on a second strategy as almost an exit strategy. So if my first strategy isn't going to work, how else can I make that property work? And a lot of people ran into that as our friend Tyler Madden, who's been on the podcast several times and we just had his wife's Zosha on on episode 301.

They purchased a property as a short-term rental. after closing on the property, they found out that where the property was located, you could not do short-term rentals. And they had to transition and pivot their strategy to medium-term rentals. And they actually ended up working out great for them, but being cautious of if you have a different strategy so that if you are maybe wrong in running your numbers as to what that backup exit plan can be, and maybe it's selling it, maybe, you know, turning in medium-term rental, whatever, is that you have some kind of backup in place in case that first strategy doesn't end up working out the way that you want it to. And it's almost like having a safety net.

I just want to highlight really quickly. Asch, you talked about the buy box and just to like clarify that for folks that maybe aren't familiar with that phrase. Again, your buy box is basically just you identifying what type of property am I comfortable purchasing that aligns with my chosen strategy and with my chosen goal or like what I'm trying to get out of this. It's like I can tell you for us, if we're flipping a home and Joshua Tree, we're typically looking for something that's about three bedrooms, usually one to two bathrooms, 1,100 to 300 square feet, built sometime around 2000 to 2000 and maybe 10 at the latest because we know inside of that little box pretty much down to the penny how much we're going to spend to renovate something

like that. We know that we can get in and get out. We can finish a rehab in six weeks on that kind of product. And it's something that we've done multiple times. However, when you're first starting, it's not always easy to really know what your buy box is. And sometimes you kind of just got to use the data that's available and make your best judgment. So I can, like on the short term rental side, when we first started looking, we looked at all the data for that specific market. And we compared revenues by bedroom size. Typically, when you're analyzing short-term rentals, you kind of separated by bedroom count. And we looked at five bedrooms, four bedrooms, three bedrooms, twos, one, studios. And we said, okay, we think the best return is here, the four or five bedroom for this specific city.

So as we started to look for deals, we said no to anything that wasn't a four or five bedroom initially. And all of our acquisition efforts were focused on four and five bedrooms because we felt that was what made the most sense. And then as we started to get more comfortable and familiar in that market, we started to identify how smaller properties could play a role in our portfolio as well. We started to open that buy box up a little bit. So I think what's most important is just creating that buy box so that you can get really good at analyzing something specific. Because like Ashley mentioned earlier, it's easier to become an expert at analyzing five bedrooms in this zip code with this type of construction style than it is to analyze everything in an entire county. So I think part of the buy box, part of the reason why it's so important is to help get.

give you that confidence as you're analyzing deals. The next thing after, you know, knowing what your market is, what kind of deal you're looking for is how are you going to pay for the deal? There's often the phrase heard that if you find a deal, the money will come because it's a deal and everybody will want to be a piece of that opportunity. But it is way less stressful if you have a plan in place as to how you're going to fund a deal before you actually have it instead of running around like a chicken with your head cut off trying to find a private money lender, hard money lender after you have the deal locked up

up and you have 72 hours to get funding secure. So figuring out how you're going to fund a deal. So right now, my main sources for funding a deal are my lines of credit that I have using cash, my own cash for rehabs. And then also I have a private money lender that I use for a lot of deals. And then for my refinances, I'm doing a lot of them on the commercial side of lending. And I did one recently on the residential side. But that's kind of how I'm funding my deals. I'm not really doing any purchases that are mortgages right at the beginning that I'm usually doing the lines of credit or the cash.

Last year I did do three properties that were purchased with hard money. And right now it is way more cost effective for me to just use my lines of credit to fund the deals. Yeah, I'd say the vast majority of what's in our portfolio, both on our whole, and our flips have been funded with private capital, private money in some way, shape, or form. Every single flip we've done has been fully funded with private money. We haven't used any hard money yet. The majority of our properties that are in our short-term rental portfolio, you know,

kind of we birthed them or we bought them initially with private money and then we refied into long-term debt or we brought in partners who carried the initial mortgage. But for us, and I think because we built a little bit of a track record, it's been a good method and a win-win situation for us and that. person to leverage private money. Now, I know a lot of folks might be thinking, you know, duh, you guys are Tony and Ashley Bigger Pockets co-hosts and, you know, you guys have these big platforms. So easy for you guys to raise private capital. But I can tell you, I know people that are not podcast hosts that don't have, you know, tens of thousands of followers on social media

that are still leveraging private capital to fund the majority of their deals. And, you know, Ash and I have talked to folks on the rookie podcast who did it on their first deal, you know, with no track record whatsoever. So if you're wondering, man, how do I, where are all these people hiding that just have money to give to us investors? You got to start building your network out. And that's attending local meetups, hosting your own meetup. There's a lot of benefit that comes from that. But I think the more hands you can shake, the more ways you can provide value to other people, the easier it'll be for you to find that potential private money lender for your own deals as well. And the private money lenders that I use were all before the podcast. I didn't

meet any of them through being on bigger pockets or through the podcast. They were all private lenders before. I actually started on the podcast. So it definitely, and there's a lot of great Instagram accounts that share how to, you know, reach out to private money lenders solely at Lottes to Lases. She does a really great job of explaining in social media posts. how she has approached private money lenders, how she does, you know, a pitch deck to them per se as to what the deal is, what's it about, and how they can lend on the deal. That's one of the best ones that I've seen. Yeah. I also got a shout out, Amy Maj J-O-R-Y. She's Amy A-M-Y-M-A-H-J-O-R-Y on Instagram. And she also creates a lot of great content specifically about raising private capital for your

real estate transactions. Okay. So do you want to do one of our deals. Yeah, let's do it. Let's do it. Do you want me to go first? Yeah. If you're, if you're volunteering a tribute, let's do it. Have you seen that movie? Have you seen Hurtrams? Yeah, yeah, yeah. I actually read the books and then I saw the movie. Oh, excuse me. I've read the books first. Sometimes I got to talk about that nerdy side of me. Okay, I'm actually going to do a screen share. So if you guys are listening to this in the car, wherever you are, go back and find it on YouTube. So you can actually watch the screen as I'm through it. I'll do my best to be as visual as I can with my words. But when I speak or write,

I am definitely a lot more analytical than visual storytelling. So I'll do my best. But I'm going to do a screen share here. Okay. So first, I just want to share with you guys some of the data that I pulled on this market, because this is my first time going into this neighborhood. This is a neighborhood of Buffalo, New York. So how this deal came about in one important aspect of getting a deal done is actually sourcing deals. And so I got a text from my real estate agent that I've used for quite a few of my deals. She did my first property back in 2013. So we've had a good standing relationship. And she texts me and said, Ashley, I thought of you. I just wanted. this house, you've got to come see it. It's in an amazing area. Can you come tomorrow or something

like that? So I went and looked at it. And I just want to confirm. So this was on market. No, this was not on market. So in what the real estate agent was doing was in their office, they kind of will sometimes put their heads together and help comp a listing as to what it should be priced at. So agents will take other agents on tours. of properties that they have that are coming up to, one, help them price it, get their thoughts on it. Second, to have it almost as a pocket listing to see if they can sell it before it even goes on the MLS.

So this was considered a pocket listing where it was not listed yet. The person that lived in the property had passed away and it was now going to his estate. And there was a trustee of a state who just wanted to sell it. So my agent had gone through with the seller's agent. And so I got into the property the next day. I met her there and the seller's agent. I always, always love when the seller's agent is at the property because they know so much more about the property, about why the seller is selling than my agent does because my agent is just walking in the door with me.

And all they have is kind of what's going to be on the MLS. But this wasn't even on the MLS yet to have any information about it. So we went through the property with them. In this neighborhood, I didn't know anything about it. So it was great that we drove, we walked around, everything like that to kind of get a visual. The seller's agent knew a lot about the area and told me all this stuff. So it sounds great coming from the two agents. But then again, you have to verify.

So I went and looked at the areas where there was a lot of gentrification, a lot of revitalization in the surrounding streets because in Buffalo and along with a lot of cities, it can vary street by street. So South Buffalo, I have several investments in and I can tell you the exact, I could draw out on a map, the exact shape of where exactly I want to be in South Buffalo. And for this part, Buffalo, I just, I didn't know any of that. So going on Google Maps and doing the walk view where you can actually take your little yellow guy and walk the streets, if you can't physically. be there or going to the property.

So here's just a couple examples of the data that I pulled. So right here looking at a three-year forecast. So right here, this kind of the top column got cut off here, but where you're seeing a 10 on the top for the three-year forecast. So one to 10, 10 being the best as far as appreciation in that, in homes in that area, that they're going to see, they think. that over the next three years, this property will appreciate 18%. Okay.

Over the next year, it will be about 6%. Okay. That is considered a 10 rating compared to all of Buffalo. It is compared to the nation, it is a 7 rating, which is still actually pretty good. And then it goes on to talk about like the latest quarter where it actually went down for, from Q4, 2022 to Q1 to 2020, which I saw all over our state as to just a drop in prices. But then once spring hit, everything shot right back up again and everything's going over listing. Everything is being, you know, sold within a couple days or gone pending within a couple days.

So then another, you know, a stat that I pulled here, too, as to the population growth. So there is actually a little orange warning symbol by this. So it says within half a mile from the location, the population has changed 11%. And I believe this was within the last five years, okay? So 11% increase. And when I had clicked on that little orange thing, it said this is higher. It was either higher or on average, with the nation. I think it was higher than what the national average is for population growth.

Okay. So right there, those are two things that look really intriguing to me about this neighborhood. And I actually did it very, very niche down as to like, this is only like a three block radius right now that I'm looking in as far as comparing this neighborhood. Okay. So now I'm going to take you guys to the actual bigger pockets report that I pull. Okay, so this is using the rental calculator report. So this property that I looked at, it doesn't need really any rehab, maybe a couple of cosmetic things and just like the yard cleaned up, lots of garden gnomes, things like that. So this property, if I'm going to rent it out as a single family home,

I don't have to do any rehab. I'm going to be able to list it for $1,300 per month. It is a five-bedroom house with one and a half bath. One thing that I am really looking at right now, and I'm finding this to my advantage, and I've started looking at this because the market is competitive right now. The market has changed as to what it was two years ago, and this is probably something I will carry forward forever, though, is looking at unique properties or things that are not apparent.

So this property is a single family home, but it is actually zoned as a two family home, as a duplex. And it does have separate meters on there for electric. Yeah, let me, let me ask one thing because I think that's an important thing to call out. How did you, how did you identify that? Like, if I'm a new investor, how do I figure out if the actual usage of this property matches with what it's zoned for? So you can go to prop stream. and usually they will have that data on there as to what the zoning is. You can go to the GIS mapping system for the county.

One red flag for me to kind of like trigger looking into this was that there was the two meters on the side of the house. But if this was listed on the MLS, it would be listed as a single family home. So if this property were to get to the point where it was listed, then it would be listed as a single family. and there would be people who were looking for multifamily just automatically passing by this listing. So the only things that need to be done to actually make this back into a two unit would to be put up a wall where the stairs go to the upstairs, which is very cost effective and not hard to do. And then in the bathroom, add the shower back in. The shower was taken out, which, again, it's not that difficult of a thing to do.

There's a basement. The plumbing all runs right under the bathroom. bathroom, you just hook up a new drain and you put your shower in. So those are the two things that you would need to do. So for my example, I ran the property as a single family home. Okay, as a single family home, we kind of talked about Tony with you for short-term rentals comparing like bedroom like you're going to get more for a four-bedroom than a three-bedroom, but not as much for a five-bedroom or whatever your example is. The same may go with. a long-term rental where there just isn't enough income to support what you could charge for

a five-bedroom. So, for example, a three-bedroom house and a five-bedroom house might just only be $50 more just because nobody living in that neighborhood can pay more than $1,300 a month. So I ran this property as a single-family home, and it ended up being negative $45 in cash flow, with a negative 1.65% cash on cash return. And when I did this, I ran it with even putting 20% down on the property and just getting a conventional 30-year fixed rate loan on the property. But let's go through some of the expenses. Well, first, the rent, I found that by going to the bigger pockets rent estimator and

putting in the address of the property and pulling up comparables. Then I also went to Zillow Rent and I looked at what is currently listed. Then I also went to Facebook Marketplace and looked at what is currently listed in that area for rent. And I use those three metrics to kind of come at the point that $1,300 is a very conservative number that I could get for rent for this property as a single family home. It also has a large backyard and it has a driveway, which not a lot of the other properties in the neighborhood have that. Okay, then I went and pulled the taxes. I pulled the taxes. I never go with the MLS listing and what it says. And even though this property wasn't listed on there, I always verify myself. No matter the source, no matter who's telling me, I always verify what the property taxes are. So I went to the Buffalo Ores website. I went to the Erie County GIS mapping website and I was able to pull the property taxes off of there and get the copy of the tax bills. The next thing is insurance. So insurance, I've gotten good at estimating just because of knowing properties in this area and what I currently pay on a single family or what I currently pay on a duplex right now.

If you really want to hone in on your insurance is to actually go to a broker and get a quote and just ask them. Quotes are free to get. And yes, an insurance broker is going to get annoyed with you. If you keep every deal you analyze you, you keep asking them for, quote and you don't actually buy these properties and they're having to do all these quotes for you. But at least if you do one or two with them, you can kind of gauge an idea to what they are. And then there's also, you know, websites like Policy Genius.

We've had them as an ad sponsor before. We just go online and plug in the information and they give you a quote. And then the fixed expenses. So since this is a single family home, the tenant is going to pay for the electric, the gas, the water and sewer. There are no HOA fees. and the garbage is looped in with the property taxes, and it's like a user fee with the water, which will be billed back right to the tenant, the user fee.

And then lastly, the variable expenses. So on this, I did 8% for vacancy, 8% for maintenance, 8% for cap X. So I gauge my percentage on the condition of the property and also the age of the home. So this being a single family property for vacancy, I went with 8% where if maybe this was a 3 unit, I maybe would have cut that down to 6% just because if one tenant moves on in the single family, I have no rental income coming in.

But in a 3 unit, at least I still have two other rental units bringing rent income in. And for maintenance, because it is an older home, I did the 8%. Capax same, 8%. The management fees, 8%. That's kind of a going rate in this area. I think I was paying 6.5% before with a property management company, but that was because it was a bulk rate. But it's between 8 to 10%. I have my own property manager in place. So it ends up being less than that because I'm just paying like kind of the cost of having a property manager in a team. And so that will most likely, be a lot less, but I always like to factor in what the current property management fees are in the area because one day I decide again, I want to use a third-party property management company. I already have it baked into my numbers. But for this property, it would be a negative $45 per month in cash flow. Okay. So we did look and we did see that it is projected to have a 6% increase

every year in the home's value. So maybe if I'm going for appreciation that, you know what, I can lose $50 a month. It's fine. And I'll just wait for the property to appreciate. And I'll go in refinance and I'll pull a bunch equity out and then I'll go buy another property or maybe I'll sell it in five years when it's projected to be worth more.

Okay. So those are some of the different scenarios that are running through my head when I'm thinking about this. I don't buy usually properties that are. negative cash flow. So this would be a new thing for me if I decided to go with this property for this. And I should mention too, which I don't think I did, was the purchase price I set here was $150,000. Okay. And that's what the seller had said that they would think they were maybe going to list it for. They weren't sure yet. And I did 7% for my interest rate amortized over 30 years and the loan

amount would actually be $120,000 after putting down that down payment of 20%. Okay, so next I'm going to take you to a second analysis that I ran on the property. And the second analysis is if I were to convert this back into a duplex. Okay, so it's important to note too that for if you're going to be doing any rehab and you want to refinance, if you do the rehab, bigger pockets does have a separate calculator. They have their rental calculator, which you still can build or bake in rehab into that calculator too. But then there's also the burr calculator. And this one will be if you are doing a rehab and you're going to refinance. So this will actually calculate your holding cost during the rehab period. And so you've gotten it rented until you've refinanced. So for this one,

I did the purchase price of 140,000. Because remember, just because, somebody is asking a certain amount of money does not mean that's what you have to pay for that property. So if I'm analyzing a deal, and I may use their asking price as a starting point, but that doesn't mean that's what I have to pay. And like, oh, the deal doesn't work. I don't give up. I go in and I manipulate my purchase price. I don't go in and say, oh, well, you know what, maybe I can bump the rent up a little bit more. No, I want to be super conservative on what my rent is and also what my expenses are. So inflating expenses, not too much so that they're not realistic, but also keeping my rental income low and not overinflating that. And then if I end up

being able to list the rent, the rental income rent for even more, like great, that's bonus money. So for this one, I ran it with $140,000 as the purchase price. And this one I did that I would purchase it with my line of credit where I pay 9% with my line of credit. So I'd be paying that 9% interest only to my line of credit. I put that I could expect to refinance within four months. So, you know, if I set aside a month to do the rehab, which would be blocking off the separate door by creating a wall in the stairs and then also adding that shower into the lower bathroom. realistically, that would take less than a month, but I'm given myself a month to actually, you know, take care of that. And then by the time I close with the bank financing, I'm giving myself plenty of

time by saying four months. Okay. So differences with this, there's no down payment. I'm just taking the full 140,000 off my line of credit, paying the 9% interest, and I'll be paying $1,050 an interest a month until I'm able to refinance on that property. For the refinance, I'd like to do a residential loan at 30 years. As of yesterday, when I talked to a lender at one of the banks I use, the approximate rate would be 7.5% for that. My loan fees, I put at 4,000, which is they're usually like around 3%, I would say, on the residential side. And then my monthly P&I would be $971.91, and that's also with baking in those loan fees as adding that. But so this total loan amount, I did it at 135,000.

So that's with me leaving 5,000 of the purchase price into the deal. And then also the rehab, I estimated at 10,000. I really think the rehab is going to be less than that. But I need to clean up the yard. And there's a couple other little updates that I want to do to the property. So I'm being conservative with that 10,000 by over-inflating it a little bit. but I'm leaving money into the deal on this property. I'm only pulling out $135,000, but I have $150 into the deal.

So this makes my cash on cash return 11.22%. Okay? I usually target more for 15% at minimum on cash on cash return. This would leave my monthly cash flow $116.93. cents. And my monthly income, this is the part that I really like about turning this property into a duplex is my monthly income would be $2,100 because now I have two units and I'm able to get more for a three-bed, one bath and a two-bed one bath than a five-bedroom single-family home with one-and-a-half bath. So that was where it was kind of looking at the property and figuring out, okay, what can I do different to

maximize the income, put a little rehab money into it. And there's other examples of this. So maybe you have a property that has a large driveway. Can you rent out parking spots to the neighbors, to someone store an RV, a boat? Does it have a garage? Does it have a barn? We have one single family home that has this huge barn that we rent that out separately for somebody for storage. So I love looking at a property and thinking about, okay, what are the things that I can do different to make this a better deal instead of looking at it and like how can I manipulate the numbers in a negative way that I end up just becoming underwater because I'm not getting the rent I wanted. I cut out the lawn mowing expense thinking that I could find it a lot cheaper than what it actually costs to have the grass

cut. So as you look at the expenses here, you'll see that there are different expenses now that I do have to pay, though, because it is now the duplex. So water and sewer, it is not separately metered. So I will be paying the water and sewer. I could charge back a water fee if I wanted to, but most of the properties in that area do not. So I want to stay competitive. If I did charge it in, I would probably have to drop the rent anyways, bake in that water fee, and it would just end up being the same amount anyways. And then my insurance may be a little bit high. higher. I found compared to single family and duplexes, that on duplexes, my insurance costs do become a little bit higher because of, I don't know if it's a liability portion of having two

tenants or just like the cost of the property to rebuild because now you have two kitchens to replace, two bathrooms to replace. And then also the gas for the property that is the heat source and for the hot water tanks, that is not separately metered, only the electric is. So the gas would be paid by me, the landlord, because there's no way to tell which tenant used how much because there's not the separate meters to actually build them back. So this puts it at the monthly cash flow, $116. Cash on cash return, 11.22%. The purchase cap rate, which honestly, I don't care that much about a purchase cap rate,

is 9.33%. And then the pro forma cap rate, 6.53%. Your monthly income, $2,100 a month, your monthly expenses, $1,983.7. So the last thing I factored into this is I put in the analysis over time saying that I can expect a 3% increase in rental income, 3% increase in expense income, which probably could be a little bit more for each. And then the 5% per year property value increase. Remember that statistics showed us that it projected to be 6% and being conservative. And I did 5%. And then I just kind of laid out how the property would appreciate. But also on the calculator report, it's really nice because when you put in how you're financing the deal, if there's a mortgage, it also calculates with your loan balances based on if you made your payments to pay down principal and interest, paying down

the principal balance and gaining equity by the 5% increase every year from appreciation, but also by that loan balance being paid down and what your value is going forward and how much equity you actually have in the house. So I hold the property for 30 years, it's projected to have $860,000 in equity. But, yeah, so that's just kind of an insight as to how I would do an analysis on a single-family or duplex property. There are two kinds of real estate investors, those who have reviewed their insurance, and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs, short-term rentals, or LLC-held properties.

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Stop letting outdated lending practices hold you back. That's hostfinancial.com where your property's potential meets unlimited financing. And world class breakdown Ashley Care. So let me ask you how much of what you did has changed between Ashley, I don't know, 2019 versus Ashley today. Because that was obviously a lot of information. I'm just curious like how much of this is just, have you learned to, like, repetition because I guess I don't, I don't want our listeners to hear

this, like, man, I'm not well equipped to do any of that. So it's just like, was there a starting point you kind of built on top of it or just, I don't know, just kind of give us some insights into how it's changed, I guess. Yeah. So when I first started out, it was very much like on the, on a piece of paper. It's like, here's what the expenses are. And then I actually got very diligent in verifying everything. And that's where I were like, like, new. the dollars down to the penny. And then that's where I kind of transitioned into, okay, I can ballpark the property taxes. For the example, I showed you, I don't really know a ton about that market. So that's where I was like, I need to know exactly what the property taxes are in which

I do do that. But for a rough analysis, for a market I'm already investing in how ballpark the property taxes and the insurance, the water bill, things like that. And if it comes out, you know, looking kind of good, then that's when I go further in and I actually pulled the exact number. So right now, what has changed for me with the market is what are my options for funding and also refinancing this deal? So really getting creative with that. So right now, my line of credit is a lot cheaper than using hard money or a private money lender. Okay. And I want to use that to my advantage so that I can be more competitive because I have that

rate. Also with my private money lenders, what can I work out with them? Like maybe if I'm not even using them for all of the deal or part of the deal, definitely putting in offers for seller financing. So I'm getting more flexible on how I'm actually going to fund the deal and how I'm going to get creative with the financing going forward. The next thing I'm looking at is to what are the income streams on the property. So right now, like in Seattle, Washington, you can put an ADU, an additional dwelling unit on a single family home. You can put the ADU in your backyard.

and that can increase the value of your property and also bring in rental income. So if you're going to sell this house as a flip, you now make it more affordable to someone because they have that rental income of the ADU in the back. They can now pay more for the property and that's more in your pocket. And a lot of times the cost of building that ADU is less than what you could actually sell that property for. So for me, is looking at all the different revenue streams that can come out of that property. So with this one, it was changing that single family back into a duplex to really maximize that revenue. Oh, one thing, yes, there's one last thing I would add is that in my

market at least, there's been huge rent growth over the last couple years, but it has become very stagnant. So be careful that you are not riding those high projections again of what you can get for rental income. So look at the rental growth trends for your area too. I just got a six unit emailed to me this morning for my broker. And I'm looking at what the seller had projected the rental incomes that you could get because they said it's way below market rent. You should be able to get this. And when I pulled comps, you could not get that. Comps from last year, you could get that. But it had decreased by like a hundred, $100 of what they were renting for last year.

And that $100 makes a big difference across the bottom line when it's a six unit. So that's $600 a month that you're not getting anymore as to what they're projecting. And if you go off of old numbers that aren't accurate, then that's where you can get into trouble. So to even be more conservative, I always go a little bit under as to what the market rent is. Yeah, that's a really good point. And I'll, I'll talk a little bit about that same concept as well, Ash, about, you know, making sure that your data reflects recent changes and the market that you're looking into. But cool, let's talk analyzing short-term rentals.

You know, there's some overlap, obviously, between what Ashley just explained when she's looking at long-term rentals and what we'll be doing with short-term rentals. Specifically, on the expense side, you know, when you're analyzing the expenses for a property, as a long term and as a short term, you have mortgage expenses, principal and taxes and insurance. You have utilities, just that on a short-term rental, you are typically paying the utilities versus with the long-term rental you can pass that along to your guest. So the expense side is pretty similar, right? A lot of those inputs are the same.

Where long-term and short-terms really differ is on the income projection side. So Ashley talked about how, you know, she just mentioned it, right? you look at comparable properties to see what they were renting for today. And usually it's one fixed number that you can assume you're going to make over the life of that lease. So if I say this property is going to rent for $1,300 and then I sign a lease with a tenant for $1,300, then I know for the life of that lease that I'm going to make $1,300. With short-term rentals, you have variable income on a monthly, weekly, daily basis that you need to account for. So, I'm going to talk about what that exact process looks like for analyzing or estimating the income

on a short-term rental. Okay. So when you're analyzing a property as a short-term rental, specifically when it comes to the income, there are three kind of key pieces of information that you need to understand. You need to understand your average daily rate, which is also called your ADR. You need to understand your occupancy. and you need to understand your cleaning fees. And I'll break down each one of those three pieces.

So again, your average daily rates, your occupancy, and your cleaning fees combined to make up your income for a property. So let's go over ADR first. ADR again stands for average daily rate. And basically what this number is, is that it's the number that guests are willing to pay to stay at your property for a single night. And usually when you're analyzing a property, you want your ADR to be an average across the entire year. So you say on average across an entire 12-month period, 365 days, what are guests willing to pay for one night at my property?

And the reason we want to make sure that we're looking at an entire year is because in the short-term rental industry, what people are willing to pay for a single night varies pretty dramatically. depending on the night of the week that they're booking, right? People are typically willing to pay more for a Friday or a Saturday night booking than they are for a Tuesday night booking, right? Because there's more people traveling on the weekends. So the night of the week makes a difference. The week of the month makes a difference. And the month of the year makes a big difference as well.

Most seasons kind of have their peak time. And most seasons kind of have their slow time. For me and some of my markets, summer is the busiest time. in some of my markets, whereas in other markets, somewhere it's the slowest time. So you want to understand what those nuances are in your market to make sure that you're accounting for that in your average daily rate projection. So again, your ADR is pretty heavily impacted by seasonality.

So you want to make sure that you're looking at that number across an entire year. And I'll give you guys a breakdown on how to actually identify what that ADR is. But for now, I just want you to understand. ADR stands for average daily rates. And it's the number that shows you what your guests are willing to pay on average across an entire year for one night at your property. Next is your occupancy. Occupancy tells you how many days out of the year you can expect to be booked. Now again, if I'm comparing short-term rentals to long-term rentals, once you sign a lease with a tenant, you can expect your property

to be fully booked, or at least that unit to be fully booked for the entire duration of that lease. So if you sign a 12-month lease with someone, then you know for the next 12 months you are going to be fully occupied. With short-term rentals, we don't have leases that we sign with tenants. We have guests who come in and stay for a couple of nights and then they go home. So there's always some percentage of nights that go unbooked. And that's what you want to try and identify for your occupancy is, okay, out of 365 days, how many days can I expect to be booked? And again, you want to look at this number as an average across a year for the same reasons that we want to look at your ADR on average across an entire year because your occupancy changes. It goes up and down

depending on the month of the year. Okay. And again, I'll show you how to pull these numbers here in a sec. And then the last thing that you want to look at that gets included in your income is your cleaning fee income. Now, this is something that's unique to short-term rentals. But when you book a property on Airbnb or Verbo, as a guest, when you book a property, not only are you paying for the stay, right for your nightly rate, but you're also paying for additional fees, Airbnb charges fees, Verbo charges fees, but then host also charge what are called cleaning fees. And this cost usually gets passed on to your cleaning staff. However, you should recognize it as income for two reasons. First, because it's included in your deposit from Airbnb and Verbo when they pay you out.

And then second, you also have the opportunity to turn your cleaning fee income and to a slight profit center. As an example, on some of our properties, we might pay our cleaners, I don't know, $115 per clean, but we can charge our guest $125 per clean. So that means if I'm only paying out $115, but I'm collecting 125, every time that property gets clean, I'm making a profit, quote, unquote, of $10. And say that my property, I don't know, maybe I get booked 10 to 15 times per month, that's an additional $100 to $150 in profit that I'm generating from my cleaning fee. So I usually like to include my cleaning fee as part of my income for a property as well, for those two reasons. So again, to recap, your three pieces are your average daily rate,

your occupancy, and then your cleaning fees. So once you have all three of these, you want to put them into a formula. And again, I've, I've, got a free calculator that you guys can all download if you head to the real estate robinsons.com forward slash calculator again that's the real estate robinson's dot com forward slash calculator it's a free download as an excel file that i've used tens and thousands of people have downloaded this calculator to help them analyze deals but if you want to kind of follow along on that calculator you'll be able to do that do that there but once you get all of that data you want to plug it into a formula to understand what your projected income is so basically you take whatever you're

occupancy percentages and you multiply that to 365 days. And that will tell you how many days out of the year you can expect your property to be booked. So say from your analysis, you say, hey, 75% is a good occupancy number for this property in this market. So you would take 75% multiply that to 365. That gives you 274. So now you know, okay, I'm going to be booked roughly 274 days out of the year. So that's the first step. The second step is to take that 274 or whatever number you land on and multiply that to your projected average daily rate, to your projected ADR. So let's say that you have 274 days you project to be booked and say through your analysis, you say $250 is a good projection for my ADR. You take 274, multiply that to 250 and you get $68,500 in

baseline revenue. Okay, let me repeat that one more time. Two hundred and seventy four days is what you project to be booked. You multiply that 274 time your projected ADR. Again, in this example, let's say it's 250. 274 times 250 equals 68,500. That's your baseline revenue for your property. The last step then is to add in your projected cleaning fee income. Again, there are steps you can take to understand, hey, what's the average cleaning fee that properties are charging in my market? You use that data to assume what your cleaning fee is for the year, and then you add that to your baseline income. So again, say we have a baseline of 68,500. And through our analysis, we identify we can collect another $18,000 to your cleaning fees, which is not unreasonable at all.

$68,500 plus the $18,000 in cleaning fees gives you a total income of $86,500. dollars. Okay. So those are the inputs that you need to project your income. You need your occupancy percentage, which gives you how many days you'll be booked out of the year. Multiply that to your projected average daily rates, which gives you a baseline income. And then you add to your baseline income what you project your property will collect in cleaning fees to get your total income on that property. So that's the kind of overview of how you project your income. Now, I want to break down to just a little bit more detail how to project your average daily rates and your occupancy because those two things are super critical to get right. Now, there are two kind of different ways

to project your ADR and your occupancy levels for a property. The first approach is your comp-based approach, so your comparison-based approach. The second approach is what I call your percentile-based approach. So your first approach, approach number one is your comparison-based or your comp-based approach. The second approach is what I call your percentile-based approach. Now, let me break down what each of these means. In the comparison-based approach or the comp-based approach, what you're doing is you're looking for properties that are similar in size, design, and amenities, functionality, location to your property. Okay. You have your subject property that you're analyzing and you want to find other active listings on Airbnb or Verbo that are similar in size,

design, functionality, amenities, location, et cetera. Okay. So if yours is a brand new construction built in 2023, then you want to find other properties ideally that are brand new construction built in 23. If yours is a, you know, farm style rehab that was built in the 50s, you want to try and find other farm style rehabs that are built in, that are built in the 50s and recently rehab. If you have a lofts in downtown, you want to try and find other lofts in downtown. So you kind of get the idea here. But the goal is to use Airbnb and identify properties that are similar to yours. Once you have those properties identified, you want to understand. what are those properties charging on a nightly basis across a 30, 60, 90 day window?

And you want to go 30, 60, 90, again, to account for the fact that prices are seasonal, that ADRs are seasonal. Because if you just look at a, say, seven-day window, you might be getting the best week of the year or you might be getting the worst week of the year. Either way, your numbers are going to be off. But when you go out over a seven, 30, 60, 90-day window, you start to get a mix of what the different seasons and months can produce in terms of ADR. So you create your list of comparable properties.

Right. If you go through Airbnb, you can literally just open up Airbnb, look at your chosen market, click through, find listings that are similar and open up their calendars to see where they're charging. Okay. It's a completely free way to do this. And you want to try and build out as many comparable properties as you can. The more the merrier, right? I'd say at minimum, you want to get somewhere between 10 to 15.

ideally you want to get as many as you can. Don't put an upper limit. As long as it's a good comp, you should include it inside of your approach there. Once you have your comp based, again, you want to go through those listings and understand how booked are they over a seven-day window, how booked are they over a 30-day window, what are they charging over a seven-day window? What is their average price over a 30, over a 60, over a 90-day window? Then you use those numbers.

You get the averages of those and you plug it into the formula that we talked about earlier. Okay. So that's the first is the comp-based approach. The second approach is the percentile-based approach. And I like doing both because the cop approached is kind of like your sniper rifle approach where you're picking out specific properties that you feel are exceptionally similar to yours, whereas the percentile-based approach is kind of an aggregate approach that pulls in a little bit more data, but kind of gives you a better overview of the market.

Now, unfortunately, or not unfortunately, I guess fortunately, there's paid software out there to help you do this. I don't know of a way to do this for free outside of like you trying to build your own scraping tool to pull all of this data. But there are websites out there like AirDNA and Price Labs that are data providers for the short term mental space. We use price labs for a lot of our data analysis. And I think, gosh, what is, if you guys go to hello.pricelabs.co forward slash the real estate Robinson, you get, I think a 30 day free trial and then like 10% off of your first bill. So again, that's hello.

That's pricelabs.com for it slash to real estate Robinsons. And what you want is their market dashboards tool. And with the market dashboards tool, you're able to collect an insane amount of data on the properties that reside inside of your chosen market. So if you're following along on YouTube, you can see this future prices table here that I'm referring to. And basically what Price Labs does is that for, whatever data set you choose, right? So say I want to look at a specific market and I want to look

specifically at three bedrooms within that market. Price Labs gives me both historical and future data on what prices, what ADRs are being charged at different levels. Okay? So it breaks it down by, hey, at the 25th percentile, here's the average price that listings are charging. At the 50th percentile, here's the average price that listings are charging. At the 75th, here's the average price. that listings are charging. At the 75th, here's the average. At the 90th, here's the average. So I can see across my market at different, I guess, levels of, not luxury, but, you know, different levels of property quality, where 90th would be top of the market, 20th would be the bottom of the market. I can see on average, what are these different properties charging? And I love

looking at this data because you can get super granular, both looking at historical data and for looking data. Now, I'll try not to get too much into the weeds here, but basically you want to be able to pull this data and identify on a month over a month basis going back as far as you can. I think right now you're able to go back to like 2020 or maybe even 2021 in Price Labs data, and you want to go as far back as you can and just start looking at the trends. What is the average price for the month of July in 2021? What is the average price for the month of July in 2022? Month of July in 2020. and start comparing those.

And what you'll be able to see as you do that analysis is what are the different price points I can expect to charge based on how nice my property is. So if I think my property will operate in the top 10% or that 90th percentile, then I can kind of look at that data set to help me gauge what my average daily price and my occupancy will be. If I think that I'm going to be more kind of like middle of the road budget listing, then maybe I'm going to be looking at that 50th percentile to gauge that. But once you have those different percentiles mapped out and you've looked at it month over month, year over year, you then have a really

good handle on what do I think I can achieve with the listing that I have. Now, one important thing to call out, and this is one of the changes that you really have to be aware of. And Ashley kind of mentioned this as she was talking about at the end there about her long term rental piece. you want to understand if your market is up or down year over year. Now, we're recording this in the summer of 2023. And if you've been following the short term rental industry, 2021 was a crazy year for short-term rentals. It was immediately post-COVID. There was a tremendous amount of pent-up demand for short-term rentals and not nearly as much

as much supply as there as today. So you saw this, you know, extreme amount of demand with this. kind of lagging to keep up supplies. You really saw a lot of listings to you exceptionally well in 2021. 2021, you saw more supply come on board, where you saw kind of demand come back down to somewhat normal levels. And I think 2023 will be the first year where we see, you know, maybe a more so normalized travel cadence, at least across United States. So what you're seeing in many markets, and this isn't true for all markets, but in a lot of markets where 2021 has a higher, revenue projection than 2022. And even where 2020 has a higher revenue projection than

2023. So like in the example that I'm showing here, if you're following along on YouTube, we can see that the average price in this market for 2021 was $138. In 2022, that same data set had an average price of $135. So our ADR dropped by $3 in that same market year over year. Now, obviously, $3 isn't a huge swing. But you just want to make sure that you're accounting for that because maybe in this market, it's only a $3 drop, but maybe in a different market, it's a 15 or $25 or a $100 drop, which makes a big difference in ADRs over an entire year. So you want to make sure that not only are you looking at, you know, what am I projecting

this property to do, but what is the difference year over year? And am I accounting for that in my projections of this property? Okay. And the approach that I've just laid out, even though I'm talking ADRs, you can pull that exact same information for your occupancy rates as well. And that'll allow you to see, hey, at the 25th, the 50th, the 75th, the 90th percentile, what kind of occupancy numbers am I seeing? So once you have all that data, then you're able to drop it into a calculator. And the data that you pulled, it drops right into the calculator that I show with you guys. Again, if you go to

the real estate robincolns.com forward slash calculator, you can get a free copy of this. But here's just an example of a sample deal that we've looked at. So the first, the property that we were looking at had had a purchase price of $665,000. It was a 15% down payment. We were estimated about 3% for closing costs. That would bring our total cash investment to just under $120,000. Based on our research, we saw an average daily rate or an ADR of 385 for this property. We projected our occupancy to be 77%. And then we saw another $2,200, give or taken, cleaning fee income, bringing the total income of that property to $134,000. Now, again, don't worry about the specifics here, but just know, we took our ADR, our occupancy,

and our cleaning fee income, and we came to a total gross income of $134, almost $135,000. We then plugged in all of our expenses. So again, the basic stuff, your mortgage rates, your mortgage amount, your insurance, your taxes. The one thing that, again, is kind of unique to short-term rentals is Airbnb also charges a fee for you to be on their platform, right? that's how they keep the lights on. And as of this recording, Airbnb charges a 3% fee to host on every single booking. So you want to make sure that you're accounting for that 3% in your

analysis as well. So on $134,000 in revenue, a 3% fee is about $4,000 annually that you're paying to Airbnb. So you want to make sure you're accounting for that as well. But anyway, once we do all that, we're able to see what our total cash on cash return is for this property and allow us to make a decision on if it's a good deal or not. So I know that was a lot of information. If you guys want to go back and watch us on YouTube, I encourage you to do so. But just at a high level to recap what I'm talking about here, the steps you need to take, the data that you need, you want your average daily rate, you want your occupancy, you want your cleaning fees. You want to find comparable properties, either through the comp approach or using the kind of aggregate data from something like Price Labs.

take that information, plug it into that free calculator, and then you kind of spit out a cash and cash return. And you've got to decide whether or not that cash and cash return is good for you. So I hope that was helpful, guys. Again, if you're watching on YouTube, you can scan this QR code to download that free calculator. If you listen to the podcast, just hit over to the real estate robinson's.com for S calculator. And you can get yourself a free copy of that as well. But that was a mouthful. I'm going to shut up now because that was a lot of information. I don't know, Ash, I guess any thoughts from you? I think David and Rob might not have us back because we went way over the time that they allotted us.

But thank you guys so much for joining us. We hope that you took some value away. And so our little intro there about just deal analysis in general and then the deep dives into real life deals that Tony and I are looking at. So thank you guys for listening whether you're on the real estate podcast or you're listening on the rookie podcast. I'm Ashley at Wealtham Rentals, and he's Tony at Tony J. Robinson on Instagram. And you can hear from us again on the Real Estate Rookie podcast or on YouTube searching real estate rookie. We also have a huge community page on Facebook, Real Estate Rookie.

Thank you guys, and we'll see you next time. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. On the host, an executive producer of the show, Dave Meyer, the show is produced by Ian K, copywriting is by Calicoke content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.com.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any

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