What?! No, man? Come on, Grant? Grant Cardone has made untold millions investing in multifamily real estate investing, but when it comes to Airbnb investing, he has it dead wrong. Grant believes it’s more profitable to be in long-term multifamily investing, not so fast. Short term rentals take up too much time, according to Grant. He’s afraid of regulations shutting him down. My clients and I make massive cash flow investing in short term rentals without doing it full time. Here are four of Grants beliefs that you need to ignore to get our kind of results.
#1: Multifamily is more profitable.
Potential Investor (to Grant): What do you think about Airbnb?
Grant: Airbnb? I like it. I mean, I like Airbnb. I just don’t like it as a long-term plan. I want a longer renter?
Although Grant is right that there will always be demand for long term rentals, the growth rate for rentals has declined for the first time in years. The margins of long term rentals are already tight and now they’re getting squeezed even more by the increase in apartment supply. I feel like I see a new apartment building going up every week. However, generally speaking, if you have a top 10% airbnb property you have an enormous advantage over a long term rental. If your investment property has the amenities that guests want and you can master the marketing of your short term rental, you can make anywhere from three to four times the cash flow of any long term or multifamily investment. Notice the caveats that I gave you. You have to buy right, you have to build right, and you have to manage right in order to have a top Airbnb property. Do not just go buy some property in Orlando, FL near Disney World and expect to make a fortune. You need to intimately know your market. What are the top amenities required in order to be a top 10% property? In other words, do you need a pool? Do you need a hot tub? Do you need bunk beds? Do you need pool tables? What specifically do you need? By the way, how close are you to the traffic drivers in that mark? If people are coming to Orlando, they’re coming there because they want to go to Disney World, and I would much rather pay more to be two miles from Disney World than to be 20 miles away. You don’t have to spend three to four times more in order to achieve the three to four times cash flow, but you do have to be willing to investigate and invest in being a top property.
Point #2 You have to take too many calls and deal with too many people.
If you set things up right, you almost never have to deal with phone calls. I own short term rentals and almost all of my communication is done through technology. For example, all the day-to-day messaging that’s needed in order for a guest to check in, check out, be aware of the house rules, and other communication can be done through software like Owner Rez, Hospitable, or Guesty. What if a guest is being rowdy and being too loud in the property? You can use technology like “Noise Aware” so that you’re aware of anything taking place within the property that could cause a concern. How do you know if the guest is bringing the right number of people? What if they are having a party? That’s when you use technology like “Ring” doorbells and other types of technology in order to maintain, and know if the people that are showing up are the same people who rented.
Finally, how do you know if there’s something major that happens? Let’s say that some sort of appliance breaks down, or there’s some issue that needs to be dealt with directly. That’s when you establish a relationship with a local “boots on the ground” person who is available and you pay them a portion of the stay in order for them to be able to go out there and take care of the problem. I found a team of rockstar cleaners that take care of the property before and after every stay. I have an onsite person who lives nearby and acts as the “boots on the ground” to make sure and takes care of any issues that need one-on-one attention. I know this is starting to sound expensive, but when you buy right and you manage it right, these costs are very manageable. This leads to more five star reviews and being able to raise those rates. If you don’t want to leave money on the table, use “Price Labs” or “Wheelhouse” this is a type of software that allows you to mimic a hotel. You can literally determine what the supply and demand is for your neighborhood. You can squeeze every bit of the dollar available, for the person looking to come stay, where your property is located. Plus come on man, Grant doesn’t go answer phone calls for his long term rentals. He hires people to take care of that stuff and you can do the same thing with all that extra cash flow with your short term rentals. At the end of the day you can always find a Co-host, or a property management company, that can take it from start to finish if you don’t want to be involved at all.
Point #3 Cities will shut you down.
Grant has a good point here, but only if you invest in the wrong places. Many Airbnb investors look for markets with no regulations at all, and they go all in. The problem is when there are no regulations at all, they act surprised whenever local authorities end up proposing regulations, closing them out. However, if you invest in established Airbnb markets that rely upon tourism and visitors, you can count on well established procedures and processes and, yes, many times permits that allow well established Airbnb owners to set up a portfolio so you don’t have to worry about the risk that Grant is talking about. After all, the mayors and City Council want you to help support their tourism industry. For example, investing in markets like Destin, FL, Orlando, FL or other markets with well established Airbnb markets you don’t have to worry about investing in this market and getting pushed out. They rely upon these Airbnbs in order to establish their tourism and visitation. Also, legally speaking, most states will grandfather in existing Airbnb owners because it’s flat out too expensive and too difficult legally to stop current owners from continuing to rent.
Finally, point #4. I want something I can scale.
Short term rentals are scalable in many ways. You can convert boutique hotels, apartment complexes, and single-family homes into short term rentals and make a bundle of cash. I have clients that own, co-host, and arbitrage hundreds of units. They take home six figures from the cash flow generated from their short-term rentals. The primary way to make millions, in multifamily and long term rentals, is to own these low margin properties and own a lot of them. Myself and other clients, only own a few of these properties and we still make 6 figures. Not everything has to be on a massive scale in order to make massive cash flow. As they say, it’s not what you make, it’s what you keep.
To avoid losing your properties in a lawsuit. Watch this next video, where I talk about how to organize your corporate entity structure in order to avoid losing those properties in a lawsuit and to protect your family. I’ll see you over there to learn more.
