Many new real estate investors dream of flipping houses. Personally, I believe long-term rentals are the way to go. However, my current home has opened by eyes to a strategy that I haven’t seen anyone use before. The Airbnb Live-In Flip Strategy.
The Airbnb Live-In Flip Strategy is not just simple, but I believe it’s safer than traditional house flipping. Further more, when purchasing a home at a discount, the Airbnb Live-In Flip leaves you with plenty of options.
Let’s Break it Down Step by Step
- Purchase a home that meets the following criteria:
- Has at least one more bedroom AND bathroom than your family requires
- Needs updates such as flooring, paint, cabinets, appliances
- Priced lower than homes in surrounding area
- Located in an area with reasonable Airbnb demand. Utilize Airdna.co in order to conduct proper research
- Move into home, list at least one bedroom on Airbnb or similar platform
- As Airbnb income starts to flow, complete upgrades – DIY beneficial but not required
- Increase Airbnb per-room rate slowly as various upgrades are complete and home value increases
- Once upgrades are 100% complete, explore future options for home
- Sell the newly updated home for profit
- Turn into long-term rental
- Utilize as full time vacation rental (Airbnb)
- Continue living in the home and utilize Airbnb or simply enjoy your “free” upgrades
Why I Love This Strategy
This strategy is relatively safe because it is a “live-in” strategy. This tends to be safer than traditional house flipping because you’re only required to pay one mortgage payment.
With traditional house-flipping, you’ll need to maintain your own residence as well as the flipping project while you conduct renovations and wait for the home to sell.
The worst case scenarios are: Airbnb doesn’t work well in your area, your home value doesn’t increase after upgrades (usually due to you overpaying for the house), or the house overly expenses repairs that are not cosmetic or that require you to move out of the house.
All of these scenarios are easily avoidable by conducting proper research and doing your due diligence. I try to live by the rule “keep yourself in a position of financial strength.” If you’re able do that, even the worst case situation won’t bring you down.
The Live-In Flip Strategy truly is as simple as I mentioned earlier.
It takes time to purchase a home, but once that is out of the way, listing and maintaining an Airbnb is incredibly easy. You can have a room listed on Airbnb in less than an hour, and you could even start receiving bookings over night.
Prepare a list of upgrades for your home that have the largest impact on its value and start knocking the list out as your Airbnb income starts to flow. If you’re a handyman or woman, you can save loads of money by taking on some projects yourself. If you’re not, don’t fret! Simply save your Airbnb payouts for a little longer and have a contractor complete your upgrades.
Even though I’ve titled this strategy “Live-in Flip”, if done right, your options are truly wide open. I would say that it’s all about the deal, referring to your purchase price and the value of the home. However, you don’t necessarily need a picture perfect deal to make this work.
This isn’t a one month or even a six month strategy. It’s probably a one year strategy, at best, but two to three years is even more likely. With that being said, if Airbnb is paying more than half of your income, what’s the rush?
You could choose to truly flip the house in one or two years. You could choose to rent to a long-term tenant, or even utilize the entire house as an Airbnb rental if you fall in love with Airbnb. Additionally, you could stay put and continue to utilize Airbnb and increasing your income all the way until your family is large enough to need the entire house.
Who’s The Airbnb Live-In Flip Strategy Useful for?
While an advance real estate investor with several rental properties or plenty of house-flips under his or her belt may not be interested in this strategy, it certainly does have an audience.
There are loads of potential real estate investors just waiting to dip their toes into the best wealth-building realm our economy has to offer. However, many of those potential investors will never take the leap as they’re too risk averse.
If you are interested in owning real estate but are afraid of taking on a mortgage on top of your own rent or mortgage payment, this strategy might just be for you.
The Airbnb Live-In Flip Strategy allows you to purchase a home and instantly be involved in the short-term rental property market. Next, you will gain experience in completing upgrades on a home. After that, you can purchase a new house and either sell or rent out your newly upgraded home.
With all that being said, there is some risk in all investments, including real estate. Always remember to do your due diligence to ensure the home you purchase is a viable rental property or that your purchase price is low enough that you can profit when the upgrades are complete.
Good luck and happy investing!