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Short term, Airbnb-style rentals may be popular, but that doesn’t make them a sustainable real estate investment strategy.

Airbnb may wind up winning the legal battle for short-term rental landlords in many areas. Still, that won’t ensure the sustainability of this strategy for buy and hold or retirement investing. The high rents may be alluring to investors, and the destinations can be attractive. However, I see at least six flaws that could cause Airbnb investors a lot of pain down the road.

6 Reasons Short-Term Rentals Aren’t a Sustainable Investment Strategy

1. Short-term rentals depend on the tourism industry.

These rentals and their high rates rely on tourists and some business travelers. We’ve been through plenty of fluctuations before, where when the economy winces, tourism grinds to a halt. This could be due to terrorism, a natural disaster like a hurricane, or simply the economy tightening. That can evaporate demand for these units fast.

Related: How to Use Airbnb to Travel & Live for Free in Retirement

2. Short-term rentals create artificially high rental rates.

These types of rentals are often marketed at two to three times annual rental rates. Those rates simply aren’t affordable for local workers. This causes two issues. First, it drives out key workers like good teachers, law enforcement, service workers, and entrepreneurs, who just can’t afford to live there. This can have a long-term negative impact on a location. Secondly, these rates cause buyers and sellers to trade properties based on these artificial and often temporarily inflated incomes. When that income dries up or pauses, many landlords will find themselves underwater and in negative cash flow on an asset that is far overpriced.

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3. Short-term rentals increase landlord competition.

Now that everyone can be a landlord, many are. That’s an enormous amount of competition. When things get tougher, it will be a race to the bottom of who can charge the least.

4. Short-term rental gain are often offset by high fees.

Higher rents on short-term rentals are often offset by higher management fees as well. Airbnb, VRBO (to learn more about how to rent your place and list for free on VRBO, click here), and HomeAway (click here to list your place for free on HomeAway—only pay when you get a booking) all charge fees. Professional managers can sometimes charge as much as 30% on short-term rentals.

5. Short-term rentals don’t support reliable, long-term tenants.

Savvy buy and hold investors prize long-term tenants. Investors who have tenants who stay for years save money on marketing, screening, cleanup, and turnover costs. When you rent to people only staying for a week or a month at a time, who have no vested interest in taking care of your property, that can lead to high costs for cleanup and repairs between tenants.

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Related: With the First Airbnb Landlord Conviction, Should Vacation Owners Be Worried?

6. Short-term rentals provide inconsistent cash flow.

In some popular vacation destinations, it is possible to have your unit booked out for 12 to 18 months in advance. However, most landlords will struggle to piece together the occupancy puzzle—with some tenants staying for days, others for weeks, and a few for months. Will you still be profitable if you only manage 30% occupancy for the year?

Summary

Short-term rentals are alluring. Having one in your favorite vacation destination that you may go and use for 3-6 months of the year yourself may not be a terrible idea. You’ll enjoy using it. Those can be your best returns. However, those looking for long-term, consistent passive income and optimal returns may be best served sticking with annual rentals.

We’re republishing this article to help out our newer readers.

What do you think? Would you use Airbnb as a primary investment strategy? Why or why not?

Leave your thoughts below!





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I don’t want to keep you in suspense. The answer is yes, you’re ready!

So why haven’t you done it yet? Say the reason out loud right now. What did you say?

Not enough money?

Not enough time?

No experience?

Bad market?

Consumer debt?

The reasons (or excuses) can go on forever.

I’m still in the middle of my real estate journey. I have in no way “made it.” I’m still stressed, concerned about growth, and making decisions that keep me up at night and make my stomach turn. I still want more mentors, more knowledge, more money to invest, more success.

But I’ve taken the first step. The journey has begun.

OK, I took the first step several years ago and have done dozens of deals at this point, but I hope you get the point I’m trying to make. The only reason I’ve made any headway, developed any traction, had any success is because I started.

There’s a lot about real estate I don’t feel qualified to teach or talk about. But I can for damn sure talk about pushing past the fear and doing your first deal. Let’s walk through the above reasons together and let me help push you over the edge.

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5 Common Excuses That Keep You From Your First Deal

1. Not Enough Money

There are several ways to solve this one, and they all start with finding a really good deal. If you find a kickass deal, the money will find you. Hard money lenders are all over the country. Overall, they aren’t looking at your qualifications as a buyer. Their main concern is whether they will lose money if they have to take the deal back, finish the rehab, or sell to another investor mid-rehab. Finding deals with wide margins will find you money.

You must also be networking, both online but especially offline. Get out from behind the protection of your computer and go meet people. Find a local real estate meet up. The BiggerPockets forums are full of great options.

Related: 4 Self-Sabotaging Excuses Holding You Back From Investing Success

Another way to find money is find someone to partner with. Take a tiny percentage of the deal if need be and do a ton of extra work. Remember, the goal here is to complete your first deal, not become a millionaire overnight.

2. Not Enough Time

I’m sorry, but I have to call BS on this. If you’ve watched one second of Netflix, browsed Instagram or Facebook in the last week, or gone out with your friends, the problem is time allocation, not an actual need for more time.

I know we all need breaks, but remember that life has many seasons. Maybe this isn’t the “break” season. Maybe this is the 18-hour days grind season.

Account for time in the car, time waiting in lines, and time spent getting ready in the morning or prepping for bed. All these moments can be used to learn about real estate, make phone calls with local real estate agents or contractors, and push you forward toward your first deal.

3. No Experience

We all started with no experience. Everyone at one point hadn’t done their first deal. The answer to this is form as good a team as you possibly can.

Again, get out and network. The resources are out there; go track down your initial team and get a property under contract. You can improve on it later down the road once you start to know more about what your personal strengths and weaknesses are.

4. Bad Market

Get creative or move somewhere better. We live in the most connected day and age ever! Physical distance has massively shrunk. Starting to invest in a market you don’t live in is definitely scary, but it’s done by investors all over the world.

Again, go back and build your team. Find investors nearby who are succeeding. Or take massive action and just move. If it doesn’t work, you can always come back to where you are now.

Is financial freedom and independence worth a little risk and discomfort?

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5. Consumer Debt

The answers to this are very personal and take some soul searching. What is the debt and why do you have it? No self control, lifestyle creep, something else?

I’ve lived (and continue to live) very small. Right now, building a business is way more fun and important to me than having ANY consumer item.

Nothing brings me more fulfillment and happiness than seeing progress. If material possessions are holding you back from this goal, take massive action and have a garage sale, downside your apartment, or move home with your parents for a season. The answers are endless.

Related: 5 All-Too-Common Excuses That Keep Investors From Succeeding

How much does real estate investing and success really mean to you?

Please don’t have read this far and think I say any of this flippantly. I’m dead serious—and I know it isn’t easy. Change is hard and scary. Humans are hardwired to avoid change and the unknown.

But the only thing I can attribute any of the success I’ve had so far to is the fact that I started. I made mistakes, I keep making mistakes, and I keep going. Rome wasn’t built in a day, and financial freedom won’t be achieved in a month (or year).

Write down your action plan. Tell other people what you are going to do, and ask them keep you accountable.

Do your first deal and start the process. Build momentum.

If you aren’t sure who else to talk to, email me! I’m cheering for you, and I hope you’re cheering for me. We are all on this together. Here’s to making our lives better and then passing on that blessing to others.

We’re republishing this article to help out our newer readers.

What are you doing now to make headway towards your first deal?

Share below!





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Bellwether Enterprise Real Estate Capital, the commercial and multifamily mortgage banking subsidiary of Enterprise Community Investment, hired Ilya Weinstein as vice president of the company’s office in New York. Weinstein will focus on affordable housing as part of the Bellwether’s Affordable Group, working to increase loan production for affordable housing properties in the northeastern U.S. region.



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You can pretty much be broke at any age. For me, I was pretty poor growing up. So, there was really only one way to go, and that was up.

When it comes to financial mistakes, though, I believe that most of them are made between the ages of 25 and 35 years old.

You see, that’s the first quarter of the football game of life, or the earning years, which for most of us is between the ages of 25 to 65. It also looks like some of us may be going into overtime too, as the government keeps pushing back the retirement age (which I believe is now 67).

So, where do most of us go wrong when it comes to controlling our money?

Financial Stability = Discipline

Recently, I read where Dave Ramsey, the anti-debt guru, tweeted that if you could just save $100 a month between ages 25 to 65, at 12%, you’d have $1,176,000, thus making all of us potential millionaires. He then explained that this statement was intended to inspire people to save.

I think Dave does a great job getting folks, who are in financial trouble, back on track by eliminating all of their debts. Although this puts folks in a much better financial picture, it does so by making the assumption that all debt is bad.

For example, good debt is something that you take on to improve or to build wealth (i.e. a student loan to get a better paying job, a mortgage for a rental property, or a loan to expand your business). Bad debt is when you purchase something that goes down in value or doesn’t throw off any additional cash flow (i.e. credit card debt, a loan for a leisure vehicle, a pay-day loan, etc.).

I also believe that it’s making the assumption that people, who aren’t necessarily good with money, are not disciplined, and therefore, should not have any debt.

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The downside is that this person is limited by the negative stigma surrounding debt and is less likely to utilize disciplined leverage. By this, I mean utilizing good debt to build wealth. For example, if I took a HELOC (Home Equity Line of Credit) and I used that to buy or fix-up another property or I purchased a note with a higher return than the interest rate I borrowed at, this would be a disciplined way to leverage debt.

Utilizing these types of strategies, by the way, is how I was able to build most of my personal wealth.

Other than establishing bad debt and not utilizing disciplined leverage, another common financial mistake is living beyond your means.

Related: The 5 Steps Necessary to Master Your Personal Finances

Budgeting: Wants Vs. Needs

One thing I see wealthy people do is that they have a cash flow budget, and they pay themselves first. They know their own numbers (exactly how much they need to live on, their income, expenses, etc.), and they have a plan for the rest of their cash.

When I used to meet with first-time homebuyers, as a real estate agent for a homebuyer qualification, the first thing we talked about was their family budget. This consisted of all income and expenses and how much they would qualify for as far as housing expenses go (the biggest bill for most). Often, this is the first time many couples even look at all of their expenses written down.

For many, this was also the first time that they analyzed their wants versus their needs. They got to see firsthand how much was too much from a lender’s perspective. They also learned exactly what the bank was looking for in a mortgage, which is usually based on the borrower’s stability and ability to pay (things like front-end and back-end ratios).

Then why are so many who are starting out living beyond their means?

Maybe it’s in our instant gratification culture. Maybe we all want to show off to family and friends. Maybe instead of taking control of our money, we’re letting it control us.

In George Clason’s book, The Richest Man in Babylon, he tells parable-like stories about how clay tablets found in the Middle East from 8,000 years ago hold the secret to becoming financially well-off. Besides paying yourself first, one included instruction is to live off 70% of your income, save 10%, invest 10%, and give the remaining 10% to charity.

If this simple formula is the key to attaining financial stability, why is it that most of us don’t follow it?

Related: 8 Traits of Successful Real Estate Investors

Financial Stability

In Robert Kiyosaki’s Rich Dad’s Raising Your Child’s Financial I.Q., which comes with the Cash Flow for Kids game, he states that every time a dollar hits our hand, we’re choosing to be rich, middle-class, or poor by what we decide to do with it (from a cash flow perspective anyway).

If we spend it on expenses, we’re choosing to be poor. If we buy something that we think is an asset but it’s really a liability, then we’re choosing to be middle class. But, if we invest our money in an asset that throws off income, then we’re choosing to be rich. Sure, this is a very simplified way to look at it. But, if you think about it, it ties back into paying yourself first and hopefully investing that money in something that cash flows, so that someday you’ll have more than enough passive income to pay all of your expenses and become financially free.

So, I guess the secret is… there is no secret. You need to be disciplined, live within your means (unless you can figure out a way to expand your means), and have a budget, as well as a plan to invest in cash flowing assets. The sooner you can do this, the faster you’ll build true wealth.

We’re republishing this article to help out our newer readers.

So, what’s your secret?

Leave your comments below!





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How much money does it take to invest in real estate? Is there really such a thing as “no- or low-money down?” After you hear today’s interview, you’ll know the truth! Today we sit down with Shiloh Lundahl, a real estate investor who specializes in putting together deals using a variety of different no- and low-money strategies in some pretty unique combinations. From utilizing business lines of credit, to bringing in partners, to hard money, to lease options and beyond, this episode will give you tons of ammunition for your own creative finance deals. And don’t miss the incredible strategy that Shiloh uses today to make 300 percent more per deal than if he were to flip the home. It’s pretty darn fantastic!

Click here to listen on iTunes.

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This Show Sponsored By

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Try it today with a discount: simplisafepockets.com

In This Episode We Cover:

  • How Shiloh started his real estate investing journey
  • The book that helped him heal
  • Details about his first property
  • Office hacking and subleasing a sublease
  • His first flipping deal — $30K turned to $195K
  • How he bought his dream car
  • Losing $5K on his first flip
  • A hack with city inspectors
  • The importance of needing an assistant
  • The six different strategies he uses creatively
  • Moving to a lease-option model
  • Getting $800K in business lines of credit
  • Lease options and how he uses them
  • Selling properties 5–7 percent higher than the current ARV
  • Explaining lease option through videos
  • And SO much more!

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Books Mentioned in this Show

Fire Round Questions

Tweetable Topics:

Connect with Shiloh





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At the end of last year, Puerto Rico suffered a devastating hurricane, which some estimates say killed as many as 5,000, and left the island without power for weeks. Now, Americans are moving in on the island, capitalizing on the downward trend in real estate prices due to the storm. A new study shows home prices on the island decreased by an average 15% since the storm.



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Side hustle is a huge buzzword in the FI community. Make extra money on the side doing something fun, something you love, or even just something that pays really well.

Today we bring in Nick Loper, Founder of Side Hustle Nation, to share his expertise about side hustling: What they are, who they’re for, and how to implement one of your own. Nick also shares some of his favorite side hustles, including some surprisingly easy ways to make money.

Looking to increase your income? You MUST listen to this episode!

Click here to listen on iTunes.

Listen to the Podcast Here

Watch the Podcast Here

Help Us Out!

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds. Thanks! We really appreciate it!

Podcast Sponsor

Patch of Land is an online peer-to-peer or ‘peer-to-professional’ real estate crowdfunding marketplace that connects professional real-estate developers needing to finance their real-estate projects to willing lenders or real-estate investors.

Visit PatchOfLand.com/BiggerPockets or call 888 710 6736 to learn more!

In This Episode We Cover:

  • How Nick started his first side hustle
  • Working for Ford as a territory manager while hustling on the side
  • Nick’s personal position toward financial freedom
  • How Google shut down his website on the first day of his retirement
  • The risk of relying on your job as your only source of income
  • Side hustling as being entrepreneurial and more time leveraged
  • On having an exit plan
  • Side hustle ideas that anyone can do
  • Marketing services for freelancing and consulting
  • Hiring people on Fiverr
  • Tips for people who want to generate more income
  • Business idea-generating frameworks
  • The “intersection method”
  • The “rip, pivot, and jam” method
  • The sniper method
  • Weird and profitable side hustles
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “Start something small, start something low risk, and build that up as much as you can.” (Tweet This!)
  • “Don’t ever complicate things. Don’t try to necessarily reinvent the wheel.” (Tweet This!)
  • “Start with what you have when you have it.” (Tweet This!)

Connect with the Nick





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Sometimes you inherit tenants when you’re an active rental investor.

Many landlords instinctively want to keep inherited tenants to avoid vacancy, property updates, and the other costs and headaches that come with turnovers. Some will go so far as continuing to accept far lower-than-market rents to avoid rocking the boat.

Other landlords view all tenants they didn’t personally screen with distrust and instinctively want to get rid of them at the first opportunity.

Which impulse is right? And how do you raise the rent on these inherited tenants if you do decide to keep them?

Here’s the landlord’s guide to handling inherited tenants, and exactly how to proceed for maximum ROI.

5 Steps to Raise the Rent on Newly-Acquired Tenants

1. Screen them for yourself.

Evaluate all inherited tenants as if they were new applicants.

First, talk to the seller about what kind of tenants they’ve been. Do they always pay the rent on time? How clean are they? Have they ever violated the lease agreement?

Ask the seller for copies of their screening reports from when they originally screened the tenants and a copy of the original rental application.

Inspect the rental unit, giving the tenants as little notice as possible. You want to see for yourself how well they treat the property.

If the tenants are on a term lease, use the months in between purchasing the property and when you need to make a renewal decision to evaluate them. Are they whiny or low-maintenance? Reliable or full of excuses? Do they respect the property and your lease rules? Be sure to conduct periodic inspections.

Are they good tenants? If not, non-renew them as soon as possible.

If they’re worth keeping, it’s time to raise the rent—without losing them!

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2. Decide how much to raise the rent.

I never raise the rent by more than 5% at a time if I want to keep the tenants.

What’s the market rent for your rental unit in its current condition? If it’s significantly higher than what your inherited tenants are paying, you may need to gradually increase the rent over the course of several years to catch up with market rents.

Imagine your tenants are paying 20% below market rent. They’re good, clean, reliable tenants, and you want to keep them. You may need to make a judgment call—how long are you willing to space out the rent hikes to catch up with market rents?

If you can’t wait four years, to raise the rent 5% each year, then sit down with the tenants for a heart-to-heart. “You guys are great tenants, and I’d love for you to continue living here. With that said, you’re paying significantly lower rent than market rates, and I just bought this property and have a high mortgage payment. I’m going to need to raise the rent by X% to cover my expenses and make this work. I would love for you to stay, but I understand if that much of a hike is not feasible for you.”

One last thing: Make sure they can actually afford the new rent on their current income!

3. Build a relationship.

Have some time before their current lease term ends? Start building a relationship of trust.

Be responsive like you are with all your other properties (right?). If they call you with a concern, stay in communication with them until it’s resolved.

Ask about their children, their jobs, their hobbies. Spend a minute or two on small talk when you call them before getting down to business.

When you conduct inspections, use the time to get to know them better.

Ask them about their “dream improvements” to the property—what kind of changes they’d love to see, in a perfect world. (And let them know you can’t promise anything—you’re just trying to better understand what they want.)

When it comes time to sign a new lease agreement with an increase in rent, give them the courtesy of a phone call when you send the renewal notice. Renters are far more likely to renew if they know, like, and trust you.

4. Serve the written notice.

In all states, landlords are required to serve a written letter to tenants when raising the rent.

The advance notice timeframe varies by state, but it’s usually 30-90 days. Look up your state’s requirements many months before you actually want to raise the rent! Put a reminder on your calendar for when you need to serve the notice.

Have them select one of two options: renew at the higher rent amount or vacate by the last day of the current lease agreement.

If they choose to renew at the higher amount, don’t stop with just the signed intention to renew!

5. Sign a new lease agreement.

The prior landlord signed their own lease with the tenants. While that transfers with the sale of the property, you want to have your own lease agreement signed.

First, it’s cleaner legally. Second, you can make sure it includes all your own landlord-protective clauses.

If your inherited tenants want to continue living in your property, it will be under your rules, not the last landlord’s rules. Make sure they read the new lease agreement carefully, and make sure they understand any new requirements or rules!

ROI First

Inherited tenants can be a blessing or a curse.

Many are excellent tenants who will continue paying on time and treating your property well for years to come. Others are deadbeats who made the last landlord’s life miserable and drove them to sell.

The quality of your returns as a landlord are determined by the quality of your tenants. Your goal as a landlord should always to be to fill your properties with low-maintenance, high-ROI renters—renters who will stick around long-term, pay on time, and treat your property well.

If that sounds like your inherited tenants, do what you can to keep them, even as you raise the rent. Otherwise, move on; the last thing you want is to be stuck with low-ROI renters just because another landlord made the mistake of leasing to them!

What have your experiences been with inherited tenants? Have any tips for raising the rent on them, without losing them?

Share your experiences below!





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The real estate investment trust sector is seeing an uptick in female leadership, as a new survey reveals more than half of newly elected directors are women. But despite corporate calls for diversification, most boards have only one or two women, showing that the industry clearly has a long way to go.



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Buying and holding income-producing rental property is great. It offers the potential for passive income, long-term wealth building, and tax benefits. Still, trying to manage your rental properties yourself can really create a love-hate relationship with your investments.

Here are three of the things I love about it—and three things I despise.

3 Bad Things About Being a Landlord

While rental property is a smart investment, there are some downsides to being your own property manager.

1. No Vacations

Despite all the hype and guru claims, once you get into it, managing your own properties really isn’t that passive at all. You can definitely say goodbye to the idea of turning your phone and laptop off. You have to be on call 24/7, 365 days a year. In the event you decide to outsource management, then taking vacations can be more stress-free.

landlord-traits

Related: 5 Reasons You Don’t Want to Be a Landlord of Multiple Properties

2. Poor ROI on Your Time

The above means that you end up getting a poor ROI on your time. This is largely because of all the calls you have to handle and make and any repairs or issues you have to fix or coordinate yourself. Not many people get into real estate intending to barely make minimum wage, but some might make even less if they do the math. If you’ve got bigger money goals, you just can’t afford to do it like this.

3. Liability

As I talking about in this article on BiggerPockets, being on the frontline of property management can be risky physically, legally, and financially. For every dollar you think you are saving on property management fees, you are betting 10 more for all the things that can and do happen.

3 Good Things About Being a Landlord

You don’t really save much money by managing your own rental properties, but there are reasons you might want to try it.

1. More Control

You get direct control of all the money, how you shuffle it, who you rent to, and how you handle repairs and contractors. This allows you to have the ability to directly affect your bottom line and top line income.

2. You Can Do Better

When we don’t like the way we see other people doing things, it is easy to believe we can do better, even if we don’t understand how things are the way they are. People say nobody will manage properties like they will as the owner, though this begs the question of whether you actually have the skill set to effectively manage properties. You can always try it. Just budget in enough for a professional third party manager when you do your numbers so you can hire out if you don’t like it or aren’t getting the results you want.

3. Lower Risk of Fraudulence

If you control all your own rents and invoicing and bookkeeping, you can reduce the risk of getting fraudulent things done to you. In the big scheme of things, you might lose more in the long run due to the return on your time than if a property manager runs off with a month of rent, but some need the control to sleep at night.

Related: The Biggest Landlording Mistake I Ever Made

Summary

Investing in rental properties is great. Everyone should do it. However, the results you really get will depend a lot on how you manage it and who manages it. Make sure you know these factors and always have the option of handing it off to a third party property manager.

Being a property manager can be much better than many other jobs, yet it is typically very low paying and a role that loves to be hated on by landlords and renters alike. It may not be the job for you if what you want is more money, time freedom, and passive income.

What do you think? Anything you’d add to this list of pros and cons?

Comment below!





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