Ashley:
This is Real Estate Rook… Oh wait, Tony, this is a takeover. We’re on the Real Estate podcast, episode number 793.

Tony:
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 you. Tax benefits per se aren’t really going to help you as much, right? You want cash flow, you want profits. 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.

Ashley:
My name is Ashley Kehr, and I’m here with my co-host, Tony Robinson.

Tony:
And we’re super excited to be taking over the feed today because Ash and I feel like we’re getting called to the big leagues a little bit. But I guess we can start with a little quick tip or I think David Greene does it with a Batman voice. Now he goes like, “Quick tip,” or something like that.
Anyway, quick tip for 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 BiggerPockets 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 BiggerPockets Pro member, you get unlimited calculator uses. So make sure to check those out.
And then I guess as the second quick tip, for those of you that don’t know me and Ashley, make sure to connect with us on social. I’m @tonyjrobinson on Instagram. She’s @wealthfromrentals. If you guys want to keep up with us after this podcast episode ends.

Ashley:
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.
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. 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, BiggerPockets on YouTube, and you’ll be able to watch this video and learn along with us.
So Tony, let’s get into some deal analysis.

Tony:
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 that most people don’t spend enough time really getting good at. So I’m excited to dive into today’s content.

Ashley:
I think that it can change too. 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.
For a short-term rental, you may have to account for some kind of permit to actually operate a short-term rental. 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 in other markets and things like that.
As much as we would love to analyze deals for you guys all very 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.
First, Tony, before we actually get into the deals, do you want to do a breakdown of the process of analyzing a deal?

Tony:
Yeah, absolutely. And I think before I even talk about the process, Ash, I want to share with all of the listeners that you don’t necessarily have to be a “numbers person” to get good at analyzing deals as a real estate investor. The beautiful thing here is that regardless of how 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 rental, as a flip, as BRRRRs, whatever it is because there’s a proven set of steps you need to follow.
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 using Excel, that’s a totally free tool, but BiggerPockets obviously has a bunch of calculators that you can use to help automate this process as well. As long as you can punch numbers on your keypad, on your keyboard, then you should be able to analyze deals as well.
I just want to start with that first. That’s the important thing. I want you guys to understand that regardless of whether you’re a freak in the spreadsheets or maybe not, you can still get good at this. I lost my train of thought. What the heck did you ask me to do before I went off on to that tangent?

Ashley:
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, some of the things you should think about before actually getting into the numbers. The first thing is where are you going to invest in and doing the market analysis of figuring out if this is actually an area that’s going to benefit your why for investing in real estate.
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. 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 that 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. 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. 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 skillset to continuously to analyze markets and then go into those points.

Tony:
I think even, 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.
You talked, Ash, about are you focused on cash flow today or you focused 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. You want cash flow, you want profits.
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 because you got to identify which one supports your goal. Because we are in a very fortunate position, Ash, where we get to talk to people from all different walks of life, different stages of their real estate investing career. And I hear some folks who say, “Tony…” Actually Ash, we were in Denver just a couple of weeks ago and we were sitting with Nev, who’s a doctor. Nev actually we met at BPCON last year and he won this raffle to hang out with me, Ash, for a day at BiggerPockets headquarters and Nev is a doctor.
And obviously, doctors have high incomes and a big goal for Nev was, “Okay, how do I offset my W-2 income with the passive losses that real estate can provide?” A lot of his real estate investing strategy was focused on that piece. 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 a cost segregation study. Whereas, say someone who said, “I want to quit my job tomorrow,” they’ve got to go out and focus, “Where can I get maybe some good BRRRR deals? Where can I get good cash flow with minimal cash outlay?” I think a lot of that kind of ties into it.
But Ash, 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 started 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”?

Ashley:
Yes. 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 verify that.
Some of the tools I use for that are NeighborhoodScouts and then also BrightInvestor. Those are two pieces of software where you can pull up so much market data that I used to go to citydata.org and all these different websites to find everything that I wanted, 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.
BrightInvestor is a newer one, but you can go on there and just 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 of 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 there’s a lot of kids, 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, maybe thirty to forties where maybe they’re out of that period where they’re in their twenties 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 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.
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.

Tony:
So many good points there, Ash, 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 missed. There’s nothing wrong with saying, I know this market so I’m going to invest here because I’m comfortable, I’m familiar with it. But you have to take it one step further and make sure that it actually makes sense to invest in that market.
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…” 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 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 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 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.
When I think a little bit, Ash, about 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. BiggerPockets 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.
If you guys go to BiggerPockets, look at the tools, find the calculator for whatever strategy it is 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? How do I know if I’m missing anything? Because you see a lot of investors who, let’s say 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 renting forward, whatever, 2,000 bucks a month, but they forget that they need to include things like CapEx or maintenance and repairs.
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 that you’re going through those steps. Literally the first deal that I ever analyzed, actually the first multiple deals I 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.

Ashley:
Tony, let’s run on to now the actual deal, what your investment strategy is. 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 any zoning requirements I need to know about? Are short-term rentals allowed here? What are the rules and regulations of the city?
Pulling all of that information, that can actually be a bit of legwork if you’ve never invested in that market before or you don’t really know anything about it. When you’re doing the actual deal analysis, you want to know what strategy you’re going for. You want to have your buy box with your property type, your strategy. Are there definite no’s for you? 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. Going through your buy box, what is your max purchase price that you are looking to buy at in that market? Going through making this list will definitely help you expedite analyzing deals because you can go through and go ahead and just check like, “Nope, this property did not meet this criteria,” or, “Yes, it does.” “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. 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 Zosia 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 it 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 turning it in medium term rental, whatever that 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.

Tony:
I just want to highlight really quickly, Ash, you talked about the buy box and just to 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, what I’m trying to get out of this.
It’s like I can tell you for us, if we’re flipping a home in Joshua Tree, we’re typically looking for something that’s about three bedrooms, usually one to two bathrooms, 1,100 to 1,300 square feet, built sometime around 2000 to maybe 2010 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. I can, 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 separate it by bedroom count. And we looked at five bedrooms, four bedrooms, three bedrooms, two’s, one, studios. And we said, okay, we think the best return is here, the four or five-bedroom for this specific city. 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.
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. I think part of the buy box, part of the reason why it’s so important is to help give you that confidence as you’re analyzing deals.

Ashley:
The next thing after 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, your head cut off trying to find a private moneylender, hard moneylender after you have the deal locked up and you have 72 hours to get funding secure, so figuring out how you’re going to fund a deal.
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 moneylender 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.

Tony:
Yeah, I’d say the vast majority of what’s in our portfolio, both on our holds 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 kind of re-BRRRR them, or we bought them initially with private money and then we refiled 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, duh, you guys are Tony and Ashley BiggerPockets co-host, and 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 tens of thousands of followers on social media that are still leveraging private capital to fund the majority of their deals. And Ash and I have talked to folks on the Rookie podcast who did it on their first deal with no track record whatsoever.
If you’re wondering, man, 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 moneylender for your own deals as well.

Ashley:
And the private moneylenders that I use were all before the podcast. I didn’t meet any of them through being on BiggerPockets or through the podcast. They were all private lenders before I actually started on the podcast. Definitely, and there there’s a lot of great Instagram accounts that share how to reach out to private moneylenders. Soli, @lattesandleases, she does a really great job of explaining in social media posts how she has approached private moneylenders, how she does 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.

Tony:
Yeah, I also got a shout-out, Amy Mahjoory. She’s Amy, @amymahjoory on Instagram, and she also creates a lot of great content specifically about raising private capital for your real estate transactions.

Ashley:
Do you want to do one of our deals?

Tony:
Yeah, let’s do it. Let’s do it.

Ashley:
Do you want me to go first?

Tony:
Yeah, if you’re volunteering to tribute, let’s do it. Have you seen that movie? Have you seen Hunger Games?

Ashley:
Yeah, yeah, yeah. Actually, I read the books and then I saw the movies.

Tony:
Ooh, excuse me, I-have-read-the-books-first era.

Ashley:
Sometimes I got to talk about that nerdy side of me. I’m going to actually going to do a screen share. 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 going through it. I will 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 in storytelling. I’ll do my best, but I’m going to do a screen share here.
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. 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. We’ve had a good standing relationship and she text me and said, “Ashley, I thought of you. I just walked this house, you got to come see it. It’s in an amazing area. Can you come tomorrow?” Or something like that.
I went and looked at it.

Tony:
And Ash, I just want to confirm, so this was on market?

Ashley:
No, this was not on market. 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. 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.
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 estate who just wanted to sell it. 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.
We went through the property with them. In this neighborhood, I didn’t know anything about it. 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. It sounds great coming from the two agents, but then again, you have to verify. 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.
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 of Buffalo, I didn’t know any of that.
Going on Google Maps and doing the walkthrough 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. Here’s just a couple examples of the data that I pulled. Right here looking at a three-year forecast, so right here this, then 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 1 to 10, 10 being the best as far as appreciation in homes in that area that they’re going to see, they think that over the next three years, this property will appreciate 18%.
Over the next year, it’ll be about 6%. That is considered a 10 rating compared to all of Buffalo. Compared to the nation, it is a seven rating, which is still actually pretty good. And then it goes on to talk about the latest quarter where it actually went down from Q4 2022 to Q1 to 2023, 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 sold within a couple of days or gone pending within a couple of days.
Then another stat that I pulled here too, as to the population growth. There is actually a little orange warning symbol by this. It says within half a mile from the location, the population is changed 11%, and I believe this was within the last five years, 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.
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 this is only a three-block radius right now that I’m looking in as far as comparing this neighborhood.
Now I’m going to take you guys to the actual BiggerPockets report that I pulled. This is using the rental calculator report. 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. 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. 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.

Tony:
Let me ask one thing because I think that’s an important thing to call out. How did you identify that? 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?

Ashley:
You can go to PropStream and usually, they’ll 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 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.
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. 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 room is 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. You just hook up a new drain and you put your shower in.
Those are the two things that you would need to do. For my example, I ran the property as a single family home. As a single family home, we kind of talked about, Tony, with you for short-term rentals comparing like bedroom count. 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 was. 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.
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. I ran this property as a single family home and it ended up being -$45 in cash flow, with a -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 BiggerPockets rent estimator and putting in the address of the property and it 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.
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. I went to the Buffalo ORS 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 every deal you analyze, you keep asking them for a 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 websites like Policygenius. 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. 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 to the tenant, the user fee.
And then lastly, the variable expenses. On this, I did 8% for vacancy, 8% for maintenance, 8% for CapEx. So I gauge my percentage on the condition of the property and also the age of the home. This being a single family property, for vacancy, I went with 8% where if maybe this was a three-unit, I maybe would’ve cut that down to 6% just because if one tenant moves out in the single family, I have no rental income coming in. But in a three-unit, at least I still have two other rental units bringing rent income in.
Then for maintenance, because it is an older home, I did the 8% CapEx, 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 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 -$45 per month in cash flow. We did look and we did see that it is projected to have a 6% increase every year in the home’s value. 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 of 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.
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 a negative cash flow. 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. 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%.
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. It’s important to note too, that if you’re going to be doing any rehab and you want to refinance, if you do the rehab, BiggerPockets 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 BRRRR calculator, and this one will be if you are doing a rehab and you’re going to refinance. This will actually calculate your holding cost during the rehab period until you’ve gotten it rented, until you’ve refinanced.
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. 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. Inflating expenses, not too much so that they’re not realistic, but also keeping my rental income low and not over inflating that. And then if I end up being able to list the rent for even more like, great, that’s bonus money.
For this one, I ran it with $140,000 as a 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. I’d be paying that 9% interest only to my line of credit. I put that I could expect to refinance within four months. 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 giving myself a month to actually 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. 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 now I’ll be paying $1,050 in interest a month until I’m able to refinance on that property.
For the refinance, I would 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 around 3%, I would say, on the residential side, and then my monthly P&I would be $971 and 91 cents. 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. 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. This makes my cash-on-cash return 11.22%. I usually target more for 15% at minimum on cash-on-cash return. This would leave my monthly cash flow $116 and 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 baths. So that was where I 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. Maybe you have a property that has a large driveway, can you rent out parking spots to the neighbors, to someone to 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.
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 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.
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. Water and sewer, it is not separately metered. 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. 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 higher. I found compared to single family, 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 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. The gas would be paid by me, the landlord, because there’s no way to tell which tenant used which meter or used how much because there’s not the separate meters to actually bill them back.
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 and 7 cents.
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’s projected to be 6%. I’m 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.
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.

Tony:
And world-class breakdown, Ashley Kehr. Let me ask you, how much of what you did has changed between Ashley of, I don’t know, 2019 versus Ashley of today? Because that was obviously a lot of information. I’m just curious how much of this is just have you learned through repetition? Because I guess I don’t want our listeners to hear this like, man, I’m not well-equipped to do any of that. It’s just like was there a starting point you kind of built on top of it or just, I don’t know? Just give us some insights into how it’s changed, I guess.

Ashley:
Yeah. When I first started out, it was very much 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 do 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 rough analysis for a market I’m already investing in, I’ll ballpark the property taxes and the insurance, the water bill, things like that. And if it comes out looking kind of good, then that’s when I go further in and I actually pull the exact number.
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. Right now my line of credit is a lot cheaper than using hard money or a private moneylender. 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 moneylenders, what can I work out with them? 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. 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? Right now 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. If you’re going to sell this house as a flip, now it makes 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. For me, it’s looking at all the different revenue streams that can come out of that property. 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 of years, but it has become very stagnant. Be careful that you are not riding those high projections again of what you can get for rental income. Look at the rental growth trends for your area too. I just got a six-unit emailed to me in this morning from 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 dollars of what they were renting for last year. And that hundred dollars 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 any more 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. To even be more conservative, I always go a little bit under as to what the market rent is.

Tony:
Yeah, that’s a really good point, and I’ll talk a little bit about that same concept as well, Ash, about making sure that your data reflects recent changes in the market that you’re looking into. But, cool. Let’s talk analyzing short-term rentals. 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, 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 a long-term rental, so you can pass that along to your guest. The expense side is pretty similar. A lot of those inputs are the same.
Where long-term and short-terms really differ is on the income projection side. Ashley talked about how. She just mentioned it, right? She looked 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.
If I say this property’s 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. I’m going to talk about what that exact process looks like for analyzing or estimating the income on a short-term rental.
When you are 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. Again, your average daily rates, your occupancy, and your cleaning fees combine to make up your income for a property. 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. 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, because there’s more people traveling on the weekends. 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 in some of my markets, summer is the busiest time in some of my markets, whereas in other markets, summer is the slowest time. 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.
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. Now, 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. If you sign a 12-month lease with someone, then you know for the next 12 months, you are going to be fully occupied.
Whereas 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. 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 or goes up and down depending on the month of the year. 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 Vrbo, as a guest when you book a property, not only are you paying for the stay, for your nightly rate, but you’re also paying for additional fees. Airbnb charges fees, Vrbo charges fees, but then the 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 Vrbo when they pay you out, and then second, you also have the opportunity to turn your cleaning fee income into 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 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. I usually like to include my cleaning fee as part of my income for a property as well, for those two reasons.
Again, to recap, your three pieces are your average daily rates, your occupancy, and then your cleaning fees. Once you have all three of these, you want to put them into a formula. And again, I’ve got a free calculator that you guys can all download if you had to, therealestaterobinsons.com/calculator. Again, that’s therealestaterobinsons.com/calculator. It’s a free download. It’s an Excel file that I’ve used. Tens of 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 there.
But once you get all of that data, you want to plug into a formula to understand what your projected income is. Basically, you take whatever your occupancy percentage is 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.
Say from your analysis, you say, “Hey, 75% is a good occupancy number for this property in this market.” You would take 75%, multiply that to 365, that gives you 274. 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.
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. Let me repeat that one more time. 274 days is what you project to be booked. You multiply that 274 times 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. Again, say we have a baseline of 68,500, and through our analysis, we identify we can collect another $18,000 a year in 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.
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 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. You have your subject property that you’re analyzing, and you want to find other active listings on Airbnb or Vrbo that are similar in size, design, functionality, amenities, location, et cetera.
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 2023. If yours is a farm-style rehab that was built in the fifties, you want to try and find other farm-style rehabs that are built in the fifties and recently rehabbed. If you have a lofts in downtown, you want to try and find other lofts in downtown. 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 7, 30, 60, 90-day window, you start to get a mix of what the different seasons and months can produce in terms of ADR.
You create your list of comparable properties right after 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 what they’re charging. 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. 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. That’s the first is the comp based approach.
The second approach is the percentile based approach. And I like doing both because the comp approach, it’s 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 aggregated 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 you trying to build your own scraping tool to pull all of this data, but there are websites out there like AirDNA and PriceLabs that are data providers for the short-term rental space.
We use PriceLabs for a lot of our data analysis, and I think, gosh, if you guys go to hello.pricelabs.co/therealestaterobinsons, you get I think a 30-day free trial and then like 10% off of your first bill. Again, that’s hello.pricelabs.co/therealestaterobinsons. 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 within inside of your chosen market. If you’re following along on YouTube, you can see this future prices table here that I’m referring to.
And basically, what PriceLabs does is that for whatever dataset you choose, so say I want to look at a specific market and I want to look specifically at three bedrooms within that market, PriceLabs gives me both historical and future data on what prices, what ADRs are being charged at different levels. 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. At the 90th, here’s the average.
I can see across my market at different, I guess, levels of, not luxury but different levels of property quality where 90th would be top of the market, 25th 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 forward-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-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 PriceLabs 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 2023? 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?
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 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 supply as there is today.
You saw this extreme amount of demand with this kind of lagging to keep up supply. You really saw a lot of listings do exceptionally well in 2021. 2022, 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 maybe a more so normalized travel cadence, at least across the United States.
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 2022 has a higher revenue projection than 2023. 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. 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 hundred dollars drop, which makes a big difference in ADRs over an entire year. You want to make sure that not only are you looking at what am I projecting this property to do, but what is the difference year over year, and am I accounting for that on my projections of this property?
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 and 90th percentile, what kind of occupancy numbers am I seeing? 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 share with you guys. Again, if you go to therealestaterobinsons.com/calculator, you can get a free copy of this.
But here’s just an example of a sample deal that we’ve looked at. The property that we were looking at had a purchase price of $665,000. It was a 15% down payments. We were estimating 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 rates or an ADR of 385 for this property. We projected our occupancy to be 77%, and then we saw another $2,200 give or take in 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 $134,000, 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. That’s how they keep the lights on. And as of this recording, Airbnb charges a 3% fee to host on every single booking. You’ll want to make sure that you’re accounting for that 3% in your analysis as well. On $134,000 in revenue, a 3% fee is about $4,000 annually that you’re paying to Airbnb. 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. 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 PriceLabs. Take that information, plug it into that free calculator, and then you kind of spit out a cash-on-cash return. And you’ve got to decide whether or not that cash-on-cash return is good for you.
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’re listening to the podcast, just hit over therealestaterobinsons.com/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?

Ashley:
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.
Thank you guys for listening whether you’re on The Real Estate Podcast or you’re listening on The Rookie Podcast. I’m Ashley, @wealthfromrentals, and he’s Tony, @tonyjrobinsons, 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.

Are entrepreneurs in danger of burning out? The London-based venture capital firm Balderton is worried they could be – it is reportedly launching a wellbeing programme for the founders of businesses in which it invests. The programme will offer a range of personalised courses covering areas such as nutrition, fitness, sleep and mental health.

It’s not an entirely selfless endeavour, of course. Balderton knows well that the health and wellbeing of founders is inextricably linked to the performance of their businesses. If a founder can’t perform because they’re feeling the strain – particularly in this uncertain and volatile economic environment – the venture capital firm’s investment is at risk.

This is an issue that should get far more attention. In a 2022 study by Mental Health UK, four in five small business owners said they had experienced periods of poor mental health. Yet mental health support for entrepreneurs is rarely seen as a priority – indeed, we continue to subscribe to the myth of the superhero founder who is able to deal with stress over long hours and under huge pressure.

How, then, do entrepreneurs without access to programmes such as Balderton’s initiative prioritise their mental health and wellbeing? There is no simple answer, but mental health professionals have a number of tips for managing stress and staying healthy despite the anxiety that running a business inevitably entails.

Recognise the signs

It’s easy to fall into the trap of thinking you’re coping well with the pressures of entrepreneurship. Problems often develop slowly over time and people become so accustomed to feeling stressed and worried that they assume this is their normal state. However, if you recognise the symptoms of poor mental health, you can take action earlier on.

Look out for changes of behaviour or mood, including increased irritability, loss of interest in work and colleagues, decreased productivity, a reluctance to take part in social activities, or changes in sleeping and eating behaviours. What’s normal for one person, of course, may not be for another, but it’s important to be self-reflective.

Set yourself boundaries

Entrepreneurs naturally feel passionate about their businesses and relish investing their time, often working very long hours. But it’s vital to be disciplined, for your own sake, and for the sake of the business in the long term. Setting some boundaries – and trying hard to stick to them – will help ensure that your business does not consume your life.

There are lots of different ways to do that. It could mean setting yourself specific working hours, or designating times when you will never work. It could mean being prepared to delegate more – which is important for the business in any case – and investing in tools that automate manual tasks. Crucially, entrepreneurs have to force themselves to take time off when they feel overwhelmed. Be prepared to switch off emails and social media notifications at set times.

Link physical and mental health

Your mental health and wellbeing is naturally linked to your physical health. In many cases, entrepreneurs neglect both and the problems mount up. Overwork and stress can encourage poor eating habits, for example, and result in loss of sleep.

Eating healthily, getting more sleep and taking exercise will all help with your overall sense of wellbeing. But be realistic about what works for you. Exercise, say, doesn’t have to mean running every day or taking out a gym membership – just walking the dog every morning will get you away from your desk.

Try mindfulness

Some entrepreneurs say mindfulness exercises have been hugely important in supporting their wellbeing. Incorporating such exercises into the daily routine typically takes only a few minutes each day but can have a huge impact. They might include practices such as mindful breathing or simply stepping back to appreciate your surroundings.

Many websites offer lots of advice on how to add mindfulness exercises to your working day. There are also a number of free apps that you can use to work through helpful practices. Try out different things to see what works well for you.

Ask for help

The responsibility and pressure of running a small business makes life lonely for entrepreneurs, even at the best of times. Reaching out for help and support is always important. Talk to friends and family about your concerns. Tap into resources such as networks of business owners to find people who understand what you’re going through. Use free online resources to pick up tips and advice on wellbeing.

Professional mental health support can also be invaluable – certainly if you’re struggling, but at other times too. There are many mental health professionals who have expertise in working with entrepreneurs and small business owners. They can offer specialised support to help you cope. Above all, don’t be too proud to ask for the help you need.

Practice what you preach

Finally, for entrepreneurs who employ people, it’s important not to overlook colleagues’ mental health and wellbeing too. Encourage your staff to take these issues seriously and given them the opportunity to do so. There are plenty of affordable and even free supports that you can provide to staff alongside other employee benefits.

Above all, set the right example – approach problems with a positive attitude, for example, and encourage team members to take time off and avoid overwork. If you can instill a sense of calm in your workplace, it will be to everyone’s benefit, including your own.

When you’re self-managing short-term rentals (STRs), you will eventually need a system. Maybe you can get away with chatting with your guests directly in the native VRBO interface with one or two doors, but as soon as you scale much beyond that, you’ll need to bring in a little help from apps or sites designed to address every stage in the STR rental journey. And there are a lot to choose from out there. 

We asked three experienced STR investors and property managers—people who have basically tested everything on the market—to share some of their favorites and the reasons they love them. These lists are not exhaustive by any stretch but offer great insight into platforms they use and trust.

Michael Sjogren, Investor, Coach, Podcast Host

Number of doors: Right now, we’ve got 101 doors. I own 72 of those. We have three boutique hotels and then 10 single families.

Investment areas: Massachusetts and up and down the East Coast, from New Hampshire down to Florida. 

If you have five doors or fewer

Property Management System: Hospitable 

I highly recommend Hospitable because it’s super easy. One of our core values is ‘keep it simple,’ so if you have less than five doors, even if you were going to keep going after that, Hospitable is great. It’s super easy to use, and it’s super cost-effective. 

It’ll sync up all the calendars. It’ll centralize your messaging. It has AI built into it so you can preprogram messages, which means if somebody says, ‘Hey, what time is the pool open?’ It can detect that it’s a question about the pool, and you can create preprogrammed responses, [such as], ‘Hey, Johnny, looks like you have a question about the pool. Here are the hours and directions.’ So you can just build up this database of FAQs.

Turnover and Cleanings: Turno

Turno automates your cleanings, pays your cleaners, and is super easy to use. The app ingests your calendar and knows when checkouts are. And it’s going to sync up with Hospitable. You can add multiple cleaners to it and can prioritize them however you want. This means you could have a main cleaner and a backup cleaner, and the first one to accept it would get that cleaning. 

You can build checklists in there that they fill out, and you can require them to take pictures. Then it’ll automatically pay them from your linked bank account. It just streamlines that whole process, which takes a lot off your plate at the beginning. The other cool thing is, is you can actually go on Turno and find new cleaners. 

Pricing: PriceLabs

I know a lot of people, especially newer folks, are like, well, Airbnb has all these things you can do with pricing. However, in my experience, I’ve found that our pricing is typically 30% higher than what Airbnb recommends, and we still get plenty of bookings. Airbnb is incentivized to keep prices low because they want more people to use the platform, and the easiest way to do that is to get people to charge less. 

PriceLabs looks at comps that are more relevant to what you own, in our case, a premium product, and will suggest prices based on that. Also, it will see spikes, and it’ll say, ‘Oh, it looks like Taylor Swift is in town on this Tuesday. You should probably charge double what you would normally charge.’ And that’ll do that automatically for you. You can really get in the weeds and build out custom dynamic profiles and really fine-tune this, but at the beginning, it does a really good job to just help maximize your revenue without too much of a lift on your end.

If you have more than five doors

Property Management System: Guesty

I can run my entire portfolio, including the hotels, through Guesty, and it integrates with everything under the sun, basically. So that’s our central hub. It has a lot more bells and whistles and can send text messages for communication.

We also use Guesty to coordinate cleanings—it has its own app for the cleaners, and it will schedule and automate text message reminders to them. 

Data Analysis: AirDNA, STR Insights, IntelliHost, and Rankbreeze

These tools help us not only buy new properties but also help us analyze our current portfolio to make sure all of our listings are optimized and maximizing bookings. 

AirDNA is good if you know a specific ZIP code that you want to look in, but otherwise it’s kind of hard to narrow down your search. STR Insights helps you whittle down your search and gives you access to the entire country. You can create filters to focus on—for instance, which areas have the highest ROI for properties in a certain price range?

Rankbreeze and IntelliHost help you analyze your listing. Where is it ranking on Airbnb? Is it on the first page or the second page? Where is it getting stuck? Do we need to adjust the title or the pictures? 

Luke Carl, Investor, Podcast Host

Number of doors: 270 units. Eight are STRs.

Investment area: Six different markets in four states, including Florida and Tennessee.

Property Management System: Hospitable

I stick with the simple stuff. Hospitable was originally designed to be for messaging. That was their forte. It really just was like a message helper kind of thing. 

I have hundreds of properties. I’m a busy guy. I consider myself a property manager more than an investor, even though I have five third-party property managers on my long-terms. You still have to manage the managers. 

But long story short, I’ve used them all. And for right now and for quite some time, I’ve been using Hospitable, which is probably the simplest one there is. It also seems to be a little less glitchy. A lot of them have a difficult time communicating with VRBO because VRBO is so old school and their website is kind of outdated. 

Pricing: PriceLabs

I use PriceLabs, of course. I like to say that PriceLabs is the race car, but without the driver, the car will crash into the wall and burn into a million pieces. So you have to get in there and steer the ship.

Guestbook: Touch Stay

[Touch Stay is] very easy to figure out. When I first started with it, it was a little confusing, but then I got used to it, and it’s pretty simple. It’s basically just a website that is like a dinner menu for your property.

I use QR codes around the house to direct people to the guestbook, too. Like, for instance, I have a QR code on all of my refrigerators. Most of the time, guests are really just looking for the Wi-Fi password. But I have a house in Florida with a swimming pool, and in Florida, if you have a swimming pool, by law, you have to have a pool buzzer, and the guests lose their minds over this pool buzzer. They hate it because it’s annoying, and it’s there obviously for safety reasons, you must have it. I have kids, so there’s no way I want [to] rent without this buzzer.

But I do have a QR code right next to the buzzer because inevitably, when nobody reads anything, they show up, and this buzzer goes off. They’re super annoyed, so then they can just scan that code and figure out, oh, I have to push this button.

Security: Schlage

It comes in super handy when you need to send somebody over to work on something. And I don’t like to give them the dummy code because I want to know who went in when, just in case weird stuff happens, I want to know who I’m holding accountable. 

I’ll put in the last four digits of their phone number. You just integrate Schlage in your Hospitable dashboard, and it’ll change the door code for every guest. Each guest gets the last four digits of their phone number as their door code.

Cleaners: Turno

You can go two different ways. Your cleaner could have their own Turno, and then you give them your iCal, and they drop it in there with all their other properties. That’s really the way to do it. Or you can have your own Turno and drop your cleaner’s email in there as an employee, and then you give them access to your calendar so they know exactly what’s going on all the time.

Andrew Steffens, Partner, Vacation Rentals of Florida, and Broker Associate, 27North Realty

Number of Doors: Personally, I own nine, but we manage 75 doors currently, all STR.

Investment Area: We manage primarily from Tampa to Naples, Florida, but have been expanding statewide and even have some in New Jersey.

Property Management System: Streamline

Streamline is the legacy provider PMS for midsize and larger STR property management companies. It is a bit of a bear to integrate and learn, but once it is properly set up, it does do a lot—pretty much everything we would need it to do at our size. It also has a huge integrations market, so you can quickly integrate with new technologies, i.e., rental insurance providers, channel managers, lock automations, etc.

Channel Manager: BookingPal

Streamline does direct connect to Airbnb and VRBO but is pretty limited beyond that. You need a channel manager [like BookingPal] to open new doors to get maximum exposure. Airbnb/VRBO only account for 70% of our company-wide reservations, so expanding to other channels like Booking.com, Marriott Homes, and Villas, etc., is important.

Pricing: RevMax

In today’s competitive market, pricing is crucial. RevMax is pretty sophisticated, as it constantly adjusts the price based on macro data like area searches, seasonality, etc. Also, we upgraded and now have a dedicated revenue manager there looking at our prices on a daily basis to make sure we remain competitive and get the bookings.

Automation (locks): Lynx

[With Lynx], each guest gets a unique code for the duration of their stay. They also have some other features we have not added yet, like pool heat and thermostat controls.

Market Analysis: AirDNA

[It’s] far from perfect, but AirDNA provides a great starting point when analyzing a potential property. We have a premium account, so we can see the area comps it is using for projections, and we zero in on those and see what the competition is getting on ADR and occupancy rate.

Marketing: Constant Contact and StayFi

We use [Constant Contact] to market to past guests. In Streamline, we can use coupon codes to offer to repeat business to book direct. Booking direct is important to save guests money, make more money, and have more control of the money we earn (Airbnb loves to refund guests). We also use StayFi, which makes a splash login page when people log in to Wi-Fi. It also collects guests’ emails in order to use the Wi-Fi, and then we market to them later.

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The data shows that omnichannel marketing strategies have power. When implemented successfully, they increase ad-driven store visits by 80%. With consumers relying more on their mobile devices and expecting tailored, seamless experiences from brands, failing to embrace omnichannel marketing seems like a wrong turn. Omnichannel strategies can boost sales, personalize the customer experience and increase retention rates.

Another positive is that using multiple channels to deliver individualized messages lets you reach audience members wherever they are. Whether they’re using their smartphone in your store, opening their inbox or browsing social media, your messages get seen. And ultimately, they bring your audience closer to making a purchase. But omnichannel marketing involves more than simply blasting your content onto every available platform. Here’s how to do it with thought and effectively increase your reach.

Amplify Your Content

Amplifying your content doesn’t mean simply making more of it. That strategy could backfire if you’re not talking about what’s relevant to your audience. Sometimes less is more when you can use what you already have in different ways.

Repurposing your content is something Casted, an amplified marketing platform, recommends for reaching customers more effectively. Think about the channels your ideal buyer uses and modify your content to fit each channel’s mold. Amplifying your content library can also include returning to topics you’ve talked about before. If something resonates strongly with your audience, they’re probably hungry for more. You just have to dig deeper, expand and adapt.

Say you have a high-performing blog post. It brings people to your website and pads your lead-gen results. But search engines aren’t the only place your audience hangs out. You can take the same post and turn it into a video on TikTok, a social snippet on Instagram or an infographic on LinkedIn. If there’s potential, you might turn the topic into a series by involving more than one subject matter expert.

The key is to extend your efforts beyond a single format or channel. That said, you’ll need to be strategic about it. Look at where your audience is, what formats they respond to best and what topics draw them in.

Walk In Your Target Consumer’s Shoes

Before someone buys something, they’ve likely seen multiple ads and pieces of content about it. They’ve also probably interacted with your brand in person and online through different channels. Marketing touchpoints are no longer limited to one or two. Today’s consumers are bombarded with online posts, emails and mobile app notifications on top of traditional ads.

The mobile channel alone drove 41.8% of retail e-commerce sales in 2022. While this figure is impressive, you’ve got to determine how channels like mobile apply to your audience members. Pretend you’re one of them, searching for information on the problem your product or service solves. What channels does your audience interact with, what touchpoints do they see and how effective are they?

Walking through your ideal shopper’s journey is one way to identify what touchpoints are missing from your strategy. Say you’re an online bank, such as SoFi, that offers loans, savings accounts and investment products. Perhaps your website analytics show visitors are spending more time exploring content about high-yield savings and investments. It may be the time to target these consumers with personalized touchpoints like emails.

Collecting visitors’ data through short surveys and email signup forms allows you to customize your messages, better matching their interests and behaviors. For instance, you could offer a higher interest rate if they open a savings account through your app. You could also extend a bonus for opening investment accounts with a minimum balance. Either way, you’re leveraging data to appeal to your audience’s preferences through their favorite channels.

Analyze Feedback to Optimize Performance

You won’t know what parts of your omnichannel marketing strategy are working if you don’t analyze the data. More importantly, you won’t know what you should tweak so they can work. Stats you’ll want to look at include conversion and retention rates. But customer satisfaction, general brand sentiment and customer lifetime value are additional data points to consider.

For example, a video with low conversion rates may present several opportunities. Maybe the format or length isn’t appropriate for your goal. Perhaps you want to educate your audience to convince them your brand offers the best solution. You might test the same content as a webinar and a how-to series. You can optimize your strategy to increase conversion rates by seeing which format performs better.

Likewise, you can look at your overall approach’s impact on customer lifetime value. What role do different touchpoints play in incremental sales if you’re a mass-market retailer like Target? Maybe app notifications about sales and gift card incentives are more effective than direct mail. They’re immediate, using past browsing and purchase history to deliver individualized savings. However, customer sentiments from surveys reveal that too many notifications turn shoppers off.

Combining your data sources, you might find two app notifications a week is the sweet spot. With this frequency, you can positively impact customer lifetime value and brand sentiment. You’ll be reaching your audience how—and how often—they prefer.

Achieving Omnichannel Marketing Reach

Omnichannel marketing strategies often have the same effect that multiple product displays in a store do. No matter where consumers turn, you’re constantly reminding them of your brand’s existence and the value it can offer. With well-thought-out and refined approaches, omnichannel marketing can help extend your reach to those ready, willing and able to buy.

As a real estate investor, you should understand the NAICS code that relates to your industry.

This article discusses the finer details of this code system and its impact on your business. 

What Is a NAICS Code?

The North American Industry Classification System (NAICS) is developed by the United States, Canada, and Mexico to classify businesses into industry-specific categories for economic data collection, analysis, and reporting.

In some states, providing your NAICS code is optional, but in other states, providing your code will be required.

Why Do I Need a NAICS Code?

While a NAICS code won’t make or break your real estate investing business, it can be useful in certain situations.

Economic tracking and analysis

Governments and researchers use NAICS codes to track economic activity, analyze growth trends, and predict future performance. If you’re in the real estate business, using the appropriate NAICS code helps ensure that data about your sector of the economy is accurate.

Loan application

When applying for business loans or lines of credit, financial institutions often request a NAICS code to better understand your industry and its potential risks. The code helps them make informed decisions about your eligibility and the loan terms.

Business licensing and zoning

Some local governments require a NAICS code when applying for business licenses or determining appropriate property zoning. The code helps the authorities understand the nature of your business.

Tax purposes

Some tax deductions and credits are industry-specific. The Internal Revenue Service (IRS) and other tax authorities may use NAICS codes to determine eligibility for these tax benefits.

Insurance

Insurance companies often use NAICS codes to understand the risk associated with a particular business. This helps them calculate appropriate insurance premiums.

Business relationships

If you work with other businesses, such as contractors or suppliers, they may request your NAICS code to better understand your business and its needs.

Where Can I Find My NAICS Code?

Visit the NAICS website to identify the NAICS code for your LLC. You can find your code using either the keyword or industry search options.

If you’re using the keyword method, type the initial term of your business’s sector into the “NAICS Keyword Search” field. Hit “Submit” and search the results until you find the code most closely related to your field.

You can also use the industry search method. This involves selecting your business sector (in this case, real estate) from the industry list located beneath the search bar. Your industry’s corresponding NAICS code will be displayed. 

For further assistance in identifying your LLC’s NAICS code, consider contacting the U.S. Census Bureau at 1-888-756-2427.

Common NAICS Codes for Real Estate Investment

Here are some of the most common NAICS codes for real estate-related businesses. 

• 531110: Lessors of residential buildings and dwellings. This applies to investors renting out residential properties like apartments, homes, and condos.
• 531120: Lessors of nonresidential buildings (except Miniwarehouses). This code is used for investors leasing commercial properties such as office buildings or shopping centers.
• 531130: Lessors of miniwarehouses and self-storage units. This code applies to investors in the self-storage or mini-warehouse business.
• 531190: Lessors of other real estate property. If an investor leases out other types of real estate properties not mentioned above, they would use this code.
• 531210: Offices of real estate agents and brokers. If an investor also acts as a broker or real estate agent, they would use this code.
• 531311: Residential real estate property managers. Investors who manage residential properties for themselves or others would use this code.
• 531312: Nonresidential property managers. This code applies to investors who manage nonresidential properties.
• 531320: Offices of real estate appraisers. If an investor also does property appraisals, they would use this code.
• 531390: Other activities related to real estate. This catch-all code covers other real estate activities that do not fit under the other codes.

As you can see, there’s a code for every type of real estate business. Your NAICS code should reflect your primary business activities. 

Conclusion

It doesn’t matter if you’re selling real estate, renting real estate, or partaking in some other type of related investing activity, understanding and utilizing the appropriate NAICS code for your real estate business is essential for economic tracking, loan applications, tax purposes, and more.

As a real estate investor, you can use this classification system to enhance your business’s visibility and streamline various processes related to licensing, zoning, and financing.

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Some U.S. mayors are loosening up rules that determine how developers convert office buildings into apartment complexes. The conversion trend sped up in the 2020s, as the Covid pandemic remote work boom reshaped cities. Declines in office leasing activity is constraining funding for services like education and transit, leading some local leaders to prioritize conversion of dated buildings. These rule changes may create some additional housing supply in regions like the U.S. East Coast.

What’s standing between your company and more sales?

It could be paper cuts caused by your marketing content.

Yes, I’m talking about those small yet surprisingly painful slices that seem attracted to the most delicate parts of your fingers.

In the 20-plus years I’ve been writing and editing marketing content, I’ve seen many brilliant entrepreneurs, small business owners, and freelancers pour significant resources into content marketing only to run into a sales wall because of common content problems that cause paper cuts.

What causes content paper cuts? The following list will give you an idea, but it’s by no means exhaustive:

• Poor first impression
• Irrelevant graphics
• Unexplained terms
• Lack of social proof
• Strange color scheme
• Unequal value exchange
• No way to contact you
• Broken forms
• Content looks dense
• Unclear differentiation
• No way to close the gap
• Poor text flow
• Heavy negative language
• Unanswered reader questions
• Broken shopping cart
• Content lacks structure
• Lack of thought transitions
• Heavy jargon
• No clear selling proposition
• Lack of evidence
• Preaching
• Aggressive sales language
• Unaddressed reader objections
• Grammar errors and typos

True, none of us is perfect. We all make mistakes.

But it’s that very thinking—we all make mistakes—that leads too many content writers and content teams to leave prospects vulnerable to the peril of paper cuts.

The true peril of paper cuts is that they add up.

Death by 1,000 paper cuts

Have you heard the phrase “death by 1,000 paper cuts?”

The original phrase is “death by 1,000 cuts.” It’s an old Chinese method of torture and execution by… I’m sorry to put this visual in your mind… slow slicing.

Today, death by 1,000 paper cuts refers to dying of 1,000 small ailments or being crushed by 1,000 minor problems instead of a single large one.

And that’s exactly what happens to buyers when they read poor marketing materials.

Here are examples of how paper cuts play out in a few different forms of content.

Paper cuts from your website

Imagine a prospect lands on your website, which has needed an upgrade for many years. “It looks like it was built in 2008,” they think. Paper cut, paper cut.

Because they need what you offer, they don’t hit the back button to return to the search results. They read on. “Wait, is that a typo?” they think. Paper cut.

“What’s this supposed to mean?” they think, reading and re-reading but not understanding the text. “Sigh.” Paper cut, paper cut, paper cut.

They click on your services page and notice that the images are misaligned. Paper cut.

After experiencing seven paper cuts, your prospect is hurting. They leave your site, searching for a different consultant.

Paper cuts from an ebook

Another prospect responds to a LinkedIn ad and downloads an ebook from your SaaS company. It looks nice, so that’s a plus.

They open the ebook expecting to scan the headings to see what’s most important and worth reading… but there aren’t any headings. Paper cut.

Still interested, they begin to read.

Then, 97 words in, the writer begins pushing, selling, and assuming. “You need this process because it makes things easier for everyone in your company,” they say.

The prospect bristles. They had been expecting an exploration of the ebook topic, not an immediate sales pitch. Paper cut, paper cut.

Can you sense how the prospect might be losing trust in your company already? And they’re still on the first page.

Paper cuts from a newsletter sign-up page

Your prospect just spotted a post on Twitter offering an email newsletter on a topic of interest. They click the link, arrive on the newsletter sign-up page, enter their name and email address, and click the subscribe button.

Nothing happens.

“Am I subscribed or not?” they wonder, clicking the button again.

Still nothing. Paper cut.

The prospect wants to hear from you, though—a rare case, indeed—so they open their email to see if they received an opt-in or welcome email from you.

Nope. Nothing.

Paper cuts galore.

Although there’s a small chance that the prospect might contact you to let you know your form isn’t working, there’s a much larger chance that they’ll drift away, maybe forever.

Can you feel how painful these issues are for prospects? Do you see why you might be missing out on droves of new customers simply because your content lacks precision and polish?

Empathy and editing: Your protection against paper cuts

There are two ways to be sure you won’t wind up with paper cuts in your content: Developing empathy for readers and working with a content editor.

Content editors already have empathy for readers. That’s why they’re editors.

Content editors don’t turn away when they experience paper cuts. Instead, they dig deep to understand the message your content is trying to bring into the world. And once they understand that message, they fix your content so its message shines brightly, resonates with readers on a deeper level, and does not leave paper cuts.

But you don’t have to hire an editor. You, your writers, and your content team can develop empathy for readers, too. Here are several ways to go about it.

1. Know your buyers. If this advice sounds trite, it’s because you’ve heard it many times before. But it’s not trite. Knowing your buyers is actually the first step to eliminating many of the more serious issues that cause paper cuts. Use analytics tools, surveys, social media monitoring, and customer feedback to gather insights about buyer demographics and psychographics. Understand their preferences, interests, use cases, and pain points. Do the work, and you’ll enjoy the rewards.
2. Engage with buyers. Again, not trite. Don’t publish content in a vacuum. Respond to your audience on social media, in forums, in comment sections, and through email. Heed their questions, objections, and concerns so you can address them in your content. As you engage, actively listen, as it can give you valuable insights into buyer experiences and expectations.
3. Know what’s happening in your buyer’s world. Stay informed about the latest news, trends, and changes affecting your prospects. Doing so enables you to address current topics and relevant challenges so your content can demonstrate to readers that you understand their world.

Developing an empathetic mindset means putting yourself in readers’ shoes and considering their emotions, experiences, and goals as part of the content-creation process. It involves understanding buyer challenges and aspirations and communicating in resonating ways.

Developing empathy also requires effort. It’s an ongoing process. But by keeping your prospects at the forefront of your mind and consistently working towards understanding, you’ll create better content—without paper cuts—and win more sales.

Real estate investing, if done right, can create endless opportunities. Real estate is an awesome income producer with the right investment and jumpstarts your way to complete financial freedom.

Many real estate investors become successful through the process of learning. For a beginner investor, the learning experience is often hands-on, like shadowing someone in the field or learning through courses or books.

Even seasoned investors will continue to educate themselves throughout their careers to prosper even more. And in some states, there is a continuing education requirement to renew things like a real estate license, so for some, learning is required.

This article discusses the best resources to help any real estate professional learn and understand investing from a financial, legal, and market perspective.

How to Learn About Real Estate Investing

It’s time to dive into a few resources available to help you become a successful property entrepreneur or continue your education in real estate.

1. Books

Let’s be real, anything can change the way we think. Have you ever read a book that helps you piece together your life? We’re going off subject, but, long story short, well-written books offer a unique and often thought-provoking perspective. As a thought leader, BiggerPockets provides many books from leaders that will help you understand:

• How a transaction works with rental properties
• Legal consequences of rental management
• How to invest in REITs
• Tips for earning more than just a regular income
• How to flip a land purchase
• How to collect unpaid rent
• Types of properties to purchase with cash
• How to successfully run a real estate business

There are several books available on the market today. Believe me, if you are serious about investing in land or securities, you name it, so many books are available.

2. Courses

Have you heard of Udemy? It’s an online learning and teaching marketplace that offers a variety of short and long-term courses on any subject, including real estate. For those just beginning an investing journey, it will help you gain adequate knowledge.

Often taught by investors, an online or in-person course will give you the confidence to deal with things like investment proposals, how to do due diligence, and more.

Additionally, BiggerPockets offers a handful of virtual bootcamps on various real estate investing strategies. You can even select between interactive or self-guided options based on your learning preference.

3. Networking events

There are too many networking events or conferences to count! Attending a conference (like BPCON!) lets you network with industry experts and learn about current market trends like the best places to invest and make the most money.

Any networking meetings will enable you to listen to various successful investors in one place. Similarly, conferences let you explore investment property projects, the latest real estate technology, learn about rent trends, and much more.

There are also seminars and events to help you explore new investment avenues in real estate, gain experience, and make a profit.

4. Podcasts

Oh, the joy of just listening to things, am I right? Podcasts are available wherever and whenever you want them. Often in a series, podcasts are typically published on a daily, weekly, or monthly basis. The top podcasts in the industry cover topics like the best real estate investments in today’s world, how to properly maintain a rental property, how to set rent, or how successful real estate people got their start.

Some podcasts allow you to listen to experts tell their stories of how they got their start, their biggest lessons, and more. BiggerPockets has a number of awesome podcasts that feature experts every few days, including folks like Brandon Turner, Dean Rogers, and more.

5. Webinars

Like Facebook Live, a webinar is an online event where a company hosts a select group of members. These members are often involved in the space, be it a landlord, a property manager, and so many more. It’s perfect for interacting with mentors, learning about their journeys, and getting answers to your biggest questions.

A live webinar may update you about the latest trends in the real estate sector, inform you how to raise rent on a tenant, or even how to set rent. No matter the subject, it’s common for influencers in the space to host webinars to attract those looking to venture into the world of investing. You can benefit in so many aspects of real estate investments through webinars.

6. Blogs

Real estate blogs like BiggerPockets and other online resources are amazing resources to learn from. From renting a primary residence, buying your first fix and flip property, or collecting rent from tenants, blogs offer endless information.

If you are saving money to purchase a property and don’t have the extra capital to spend on paid resources, a blog is the perfect place to get free information.

Some of the best blogs include:

• BiggerPockets
• Landlordology
• REtipster

7. Forums

Not to toot the BiggerPockets horn again, but the company hosts one of the most popular real estate forums. These forums help people connect with the real estate community.

You can develop connections with fellow investors to build your investment network through a forum. Networking with the right people is one of the biggest secrets to success. Whether you want to sell a property to make a profit, have a cash opportunity at play, are interested in becoming a landlord, or are curious if you are paying too much for a property, a forum is a great place to ask questions.

8. YouTube

With over 2 billion users worldwide, YouTube is one of the go-to resources for free real estate content. YouTube experts have niched down these past few years from how-to videos to explainer videos.

Today, you’ll find everything from Airbnb experts, flippers, house hackers, and more. Whatever you want to invest in, consider YouTube the golden learning resource for investors, whether just getting into the space or continuing your real estate education.

Some of the top YouTube channels include:

9. Mentors

I’m grateful for the number of mentors I have in the space. From a former property manager and flipper, to a real estate agent, to the owner of a tenant background screening company, I can tell you firsthand that mentorship is crucial to success.

One place that people find mentorship is through a real estate syndicate. The syndicators form a group of real estate gurus pooling financial resources to own an investment property. A syndicator educates you on the benefits of investing in real estate and updates you on important decisions.

If you find a mentor, ask if you can shadow them. Continuing education, real estate speaking, is a never-ending process for truly dedicated real estate professionals.

Types of Real Estate Investments

Here are a few investments that are common amongst those in the space.

Real estate investment trusts

REITs allow you to get a little piece of the pie without indulging in the whole thing. REITs own commercial real estate like retail stores, hotels, and apartments. REITs often pay higher dividends, so a lot of the time, it’s more common for buyers to be retirees.

Rentals

So, you find a rental for sale. Currently, it’s rented out to college seniors in the Bay area. For a first-time landlord, it doesn’t sound too shabby of a deal if it’s in an in-demand location, even if the price is higher than they anticipated.

Flips

This is my favorite topic. What’s better than finding a diamond in the rough and fixing it up to let it shine? There are so many homes out there in need of a little TLC. Handy investors love house flipping. It’s fun, it’s a challenge, and it’s hopefully profitable.

For something like a foreclosure, cash is key. When dealing with a bank, their main concern is repaying the existing mortgage, and nothing is more attractive than a cash offer. Foreclosures, if done right, can result in a major profit if the purchaser decides to flip or rent.

Why Invest in Real Estate?

I mean, why not invest? Real estate allows you to diversify your investment portfolio and offers various returns depending on your investment. Here are the top three reasons to invest in real estate.

1. Diversification of portfolio

Diversification is investing in various types of assets, so a portfolio doesn’t solely concentrate on a single source of income or capital appreciation. As a whole, a diversified portfolio helps reduce risk and may lead to a higher return. Diversification includes more than just real estate investments. For example, it can also include stocks or bonds.

Have you ever heard of the real estate platform CrowdStreet? Instead of buying an entire property, you can buy something alongside other investors. According to the Securities and Exchange Commission, platforms like CrowdStreet are only open to accredited investors.

These types of investments are classified as securities, which must be registered with the Securities Exchange Commission.

2. Inflation hedging

One approach people take to hedge against inflation is making a real estate investment because the asset class usually has little correlation with stocks and bonds. As home values rise because of inflation and an investor’s fixed-rate mortgage stays the same, an investor’s equity in the home increases.

For example, a rental property with a short-term lease during high inflation times can be beneficial. If a property owner raises rental rates regularly while mortgage payments stay the same, increasing income is possible to help balance the rising inflation rate. Locking in low mortgage rates, be it a refinance or additional purchase, is a key part of an investor’s strategy.

3. Leverage

Except for REITs, also known as real estate investment trusts, investing in real estate gives the purchaser one tool unavailable to stock market investors: leverage. Sounds powerful, doesn’t it? Leverage allows investors to use debt to finance a larger purchase than what they have available in cash. An example of this debt used is a mortgage.

Most conventional mortgages require a 20% down payment. However, depending on the location, you might find a mortgage that requires as little as 3.5%. At a 3.5% down payment, you control the whole property and its equity by only paying a fraction of the total value. Of course, the size of your mortgage affects your property ownership, but you control it the second the papers are signed.

A flipper or landlord can take out a second mortgage on their home and put down payments on two or three other rental properties like commercial office buildings. The ultimate goal is to have the tenants pay the mortgage or wait for an opportunity to sell for a profit. The purchaser controls the assets, despite only paying for a small part of the total value.

FAQs on Learning About Real Estate Investing

Here are some of the most commonly asked questions regarding learning how to make an investment in real estate.

What age should you start investing?

Legally, you must be at least 18 to sign property paperwork. The truth is, anytime you can start to invest, you should invest. Most will start in their 20s or 30s, depending on their comfortability in taking on real estate deals.

What is the first step in real estate investing?

The first step is to take the first step! Most will start following social media influencers to help educate themselves, make an investment in a coaching program, read informational blog posts, and more. The reality is wherever you feel the most comfortable starting, that’s where you should start.

If you already have a primary residence, you could benefit by renting out a room to earn money and to see how you like it. You’ve already invested, but now you’re just testing the waters with renting.

What is the continuing education requirement for some states?

There are specific continuing education requirements for states if you want to be more than just an investor. In this case, a real estate agent. Find out what the requirements are for your state if you want to explore being an agent.

How do I educate myself on real estate investments?

There are so many different places, as I mentioned above. If you’re looking for specifics, a place like BiggerPockets is a great starting point. We’ve got everything from bootcamps to posts to a podcast, you name it, we’ve got it. If you’re a reader, the book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started by Joshua Dorkin, is also a nice starting point.

What is the best investment strategy for me?

The answer, as cheesy as this sounds, lies within. As you know, there are so many investment opportunities. If your money situation allows it, your best strategy could be in apartment investing to even rent out a room. Whatever it is, at the end of the day, the two factors to consider when creating an investment strategy for your business are time and money.

Who should I network with?

As many as you want! Let me put it this way, knowledge is everywhere. Be a sponge and get as many mentors as possible to see the different aspects of the space.

Where Will You Start?

The best real estate investments are the ones that best serve you. It could be a block full of office buildings you’ll rent out or apartments you plan to flip. Time is so valuable, making the most of it is important. It takes time to define how much capital you have available to invest or how much time you must dedicate to learning more about investing money.

Unlike a stock or bond transaction, a real estate transaction typically doesn’t happen overnight. Yes, something like a mutual fund or REIT offers better liquidity pricing. However, it’s often at the price of higher volatility and lower diversification benefits because they correlate with the overall stock market.

Aside from your 9 to 5 job, consider investing in real estate if you’re looking for a regular income. Learn the ropes, set your expectations, and make it happen when the time is right for you.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.