Owning real estate can have several advantages, but let’s face it … qualifying to buy a property in today’s economy isn’t easy. So, how can people who aren’t able to purchase real estate still take advantage of making a profit off properties?
Short-term rentals are one way someone can take advantage of it and without ever even purchasing a property. Wait … what? …
That’s right. There are people right now who rent properties from landlords and then basically sub-lease those properties to other people. There are multiple ways to do this, such as by renting the property from the landlord directly or through a lease option. Nonetheless, the beauty is in being able to cash flow on a property that you don’t even own.
Let’s say you rent a house for $2,000 per month from a landlord. Then, you list it on Airbnb for $5,000 per month. You’d make $3,000 per month in profit before paying any necessary expenses.
YEP!! It’s completely legal. What most new investors forget is that what you put into an agreement or contract is what makes a deal happen. All you need are two willing parties. So, let’s say you have a landlord who wants to make $2,000 per month. Well, if the landlord can make their $2,000 renting their property to you knowing that you will also make a profit, often, they are on board to create a win-win scenario. Sometimes you will come across landlords who have no interest in participating in what you want to do, but others may. Always be honest and tell the owner your intentions for the property. Most property owners who disagree with what you want to do only do so because they are unaware of the benefits for themselves.
One benefit is minimizing their vacancy rate by knowing that they are getting a long-term tenant who has a personal stake in keeping the property in decent shape to make a profit themselves. During this time, you are also helping pay down the property owner’s mortgage, aiding in principle paydown to increase their equity.
As the person conducting this type of business within someone else’s property, you do have to be aware of any risks associated, like destruction of property, but that is why having insurance and other security measures can help mitigate any issues. There is always a risk when you are investing and have multiple parties involved.
You don’t need to own real estate and don’t need to have a lot of start-up capital to begin. Remember, we are using other people’s property, which essentially means we are using other people’s money.
The first thing you’ll want to do is to work on your legal entity to set up your business structure and foundation. With this, you’ll want to start implementing the infrastructure you’ll need to get the business up and running so you can sustain it effectively. To do this, you’ll want an attorney and accountant so that you create an entity that both protects you on the business side, as well as offers the greatest tax advantages. This is what your attorney and accountant know best. While building the infrastructure of the business, you’ll want to also expand on building your team.. As you start to grow your business and scale to your needs, you’ll want support from a good team of people who understand the necessary steps to keep things on target. Your attorney and accountant will be the first two people on your team, and then you’ll want to expand on those who can help within the business itself like a property manager, repair person, cleaning crew, etc. If you intend to expand your business, you may also want a good real estate agent, potentially an interior designer and general contractor, and possibly a mortgage broker if you do intend to purchase properties in the future and not just rent them from landlords.
Next, you need to start your market research. With short-term rentals, it’s critical to know which properties are in high demand and in what areas. What attracts renters to a specific area and why, and then look deeper into the financials of what renters are willing to pay for an entire home, vs. a portion. You will want to check into the number of bedrooms people desire, what amenities are crucial, property proximity to downtown or tourist areas, and how the properties look. Are they overly decorated, simple, or themed? All these things play a role in helping you determine which properties will make the most out of your business plan.
Getting started with short-term rentals can be seamless if you follow these steps to get educated and to get started. Legacy offers several courses on learning all the various aspects you would need to become savvy in any investment strategy. Join us today so you can take advantage of the real estate market now, whether you own real estate, or intend to. As you can see, you don’t know what you don’t know. People everywhere with various levels of knowledge get into real estate without their own money. You can too.
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