The following is a guest post written by Boris Mordkovich. Boris and his partner Susan are experienced Airbnb hosts and real estate investors hosting close to 10,000 guests per year around the USA and managing their properties remotely while working full-time.
Since I am an avid real estate investor and Airbnb host, I was particularly intrigued when Boris reached out to me and suggested that he could write a guest post on how he build his company to the scale that he and his partner have.
10,000 guests per year is a LOT! Better yet, I was left wondering how they did this working part-time on Airbnb as they both have full-time jobs. Boris’ story is inspiring, enough so that I’m now considering how I can scale an Airbnb business using some of his tips.
How We Built a Real Estate Portfolio Focusing on Short Term Rentals
Since I was 20, I’ve always been an “entrepreneur” – starting and growing businesses. Over the last 14 years, I’ve co-founded and sold a couple of small companies and in 2011, I’ve co-founded an electric bike company that I still run to this day (www.evelo.com). The company has been growing and we have a fantastic team all over the country, so it’s been going quite well.
Running your own business provides you with a multitude of benefits, but – wealth or financial independence – is not necessarily one of them, at least not in the short run. The fact of the matter is that most of my net worth is tied up in the company and would only be released when it is acquired or goes through some sort of an exit. On top of that, the salary is kept at a minimum, as we can keep reinvesting the profits back into the company. I suspect that many other entrepreneurs, business owners or even high-income individuals are in a similar position.
My wife, Susan, also works at a large tech company and while it generates a good income, it doesn’t quite provide a lot of flexibility.
Before we got married, we’ve talked many times about how we want to structure our lives and we’ve come to the realization that we want to achieve the sort of financial independence that allows us to continue to work on whatever projects we want, but at the same time, give us the flexibility to take some time off or work remotely.
In other words, we wanted to have additional sources of income that would provide that security and flexibility, so we’re never relying on just a W2.
Airbnb Enters the Picture
We’ve always been avid users of Airbnb as guests. We’ve been using Airbnb for many years ourselves – whenever we’d travel to a new destination, we’d typically check to see what options are available through that platform first. The concept always was appealing to us.
We’ve oftentimes considered what it would look like if we put up a spare bedroom or a standalone apartment on Airbnb as a host. In fact, I still recall how in 2015, we came across an article by a guy who purchased a 1-bedroom apartment in Las Vegas, listed it on Airbnb, and documented all of his expenses and income over a course of a year and then shared it on the blog. We toyed with this idea for years but were always a bit unsure about the next step.
Eventually, we came to the realization that if we wanted our financial situation to change and get closer to our goals, we would have to act. So, in early 2017, when we came across a property that was in our budget, good condition, and largely ready to go, we decided to move forward with it and get it listed on Airbnb.
As both of us come from a tech and marketing background, we wanted to approach this in a very structured, strategic way and augment the experience with technology wherever possible.
We wanted to figure out how we can best optimize our occupancy and rates and how we can automate the mundane and repetitive tasks. We wanted to find a way to run it in a way that’s scalable in the long run. Simultaneously, we already had full-time commitments, so time was limited.
We read everything we could find online and learned the rest by trial-and-error, from how to best decorate and furnish the rooms to how to hire a reliable housekeeper and manage check-ins and check-outs. There were a million little things involved but before we knew it, our property was up and running.
To our great surprise, we’ve ended up generating over $7,000 in monthly revenue from it during the first full month.
This blew us away – this was literally my monthly paycheck and yet here, we were able to generate this all on as a side-hustle with a fairly limited time commitment.
At the end of that first month, we already knew that this would be a game-changer for us. Now was a matter of thinking bigger.
Our real estate investment strategy
As we continued to run and optimize our first property, we saw in Airbnb an opportunity to invest in real estate that can generate much higher cash flow and financial return than a traditional long-term rental.
This would allow us to scale and get to our financial goals much faster. We still didn’t know exactly where this would lead, but we wanted to dedicate more of our time and energy to it.
Our first step was to really nail down our processes. If you simply launch and proceed to handle everything manually, it can quickly become overwhelming to manage it – especially if you’re running multiple properties. You’d essentially create a full-time, 24/7 job for yourself.
Fundamentally, there are several key areas of running a short-term rental business:
- Guest communication,
- Check-ins and check-outs,
- Housekeeping, and
- Price optimization.
Fortunately, we can now benefit from a plethora of 3rd party tools that exist on the market that can automate 95% of our work in a really simple way. Here’s how we approached it:
- Guest Communication – typically the most time-consuming process is guest communication and sending instructions. This includes details on how to check-in, how to use everything inside the house, how to check-out, and so on. Fortunately, we can solve this by using a tool like Smartbnb.io. This nifty service allows us to automate all of the check-in and check-out communication for your guests, as well as automatically send out responses to the most common questions.
- Automated Check-In and Check-Out – we utilize keyless, digital locks that enable us to create a code for every guest when they check-in. These locks can expire the code when the guests check out and generate new ones for every guest if desired. This makes it very easy for the coming and going of the guests.
- Housekeeping – we typically invest quite a bit of time in finding, vetting and training a local housekeeper. That individual is quite important to the overall success, as they have a large impact on guest satisfaction (it has to be clean and neat every single time), as well as our ability to manage multiple properties remotely (they have to show up on time, every time).
- Price Management – There’s a reason why hotels, airlines, and other industries adjust their pricing regularly depending on the demand, time of year, and a myriad of other factors. This is where technology comes in again. There are a couple of tools available on the market, such as PriceLabs, BeyondPricing, and UseWheelhouse that help Airbnb hosts with price management. They monitor the demand, competition, and occupancy of your listings and those of your competitors and automatically adjusts pricing for every single one of your listings every single day. You can set a strategy that you prefer and it will make the adjustments that help you get there.
- Virtual Assistant – eventually, we also hired a virtual assistant to help us manage everything above, as well as handle edge cases with guests or ground teams. Once you get to a certain scale, that individual can also become hugely important and we’ve been very lucky with whom we’ve worked with.
How we now host nearly 10,000 guests per year in different cities around the USA
We took what we learned from the first property and, as soon as we were able to, acquired another one. And then another one.
Over the last three years, we’ve been able to use the cash flow from the existing properties, combined with our own savings, to purchase several more properties in 4 cities around the Midwest that we now run as short-term rentals.
We decided to branch out for different cities for several reasons
- It was much more affordable to do it in smaller cities. The fact of the matter is that real estate prices in certain markets are so high that it makes it nearly impossible to scale there for regular people.
- The demand remains strong in small markets as well, so our revenues are still quite healthy. What’s interesting about Airbnb is that it doesn’t have to be done in a major city nor does it have to be in the downtown area to be successful. In fact, some of the best results are oftentimes found in smaller cities and areas where the housing prices are still reasonable.
- We wanted to run this remotely, so we figured it shouldn’t matter where the property is. In fact, doing it elsewhere forces us to think through all of the possible scenarios and properly prepare to handle them remotely.
Between them all, we’re on track to host 10,000 guests per year in 2020, while managing the entire operation remotely – living hundreds and sometimes thousands of miles away from our properties – and maintaining full-time job commitments.
We love the idea of using real estate as a means of getting to financial security and independence. With a short-term rental model, on the other hand, you get all of the traditional benefits of real estate investing, as well as a very respectable cashflow even from fairly small properties which can further accelerate the pace at which you can grow the portfolio.
Although the actual process of finding the right property and setting it up does take time and energy and can be a bit of both an art and a science, once it’s up and running, it’s relatively smooth. For us, it’s the perfect tool towards getting to financial independence – it’s enjoyable, challenging, but also scalable and relatively passive once it’s setup.
If you already have a rental property or considering buying one, we highly recommend exploring the short-term rental route to see if it helps to meet your goals too.
Boris and Susan write more about their experience, as well as help other people launch, scale and automate their short-term rental properties at www.BuildYourBnb.com
Good luck with your wealth-creating journey.
If you liked this post, you might also like this one: How Do You Know When It’s Time to Sell Your Business? It’s Not All About the Money.
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Also, I published a book during the summer of 2018, “The Kickass Entrepreneur’s Guide to Investing, Three Simple Steps to Create Massive Wealth with Your Business’s Profits.” It was number 1 on Amazon in both the business and non-fiction sections. You can get a free copy here.