How can you have more cashflow from your Airbnb short term rentals? In this episode, Jason Bible and Robert Orfino are joined by George Salas to share some tips on how to achieve this. George is a real estate entrepreneur and Airbnb specialist who helps real estate professionals increase their cashflow through Airbnb. Discussing the crucial aspects of rental properties versus Airbnb, he shares the three models for entering this space. He also deep dives into the actual listing and how to create it.
Listen to the podcast here:
How To Cashflow From Airbnb Short Term Rentals With Guest George Salas And Co-Host Robert Orfino
We have a new influencer, George. George is going to work with our group and bring you tons of great contact on Airbnb. George, why don’t you give us a little background and introduce yourself to the folks out there?
What’s going on? Thanks, Robert and Jason, for having me here. I am extremely happy and glad to be here. I’m excited to work with everybody to teach and bring value to everybody that wants to learn this awesome Airbnb business. A little bit about me, I am from Peru so I’m Peruvian. I was born and raised in Peru and I moved here to the United States when I was fifteen years old. I grew up there in a small town. I moved here and came without knowing any English so I’m glad to be here. I went to high school here. I started a small business in marketing for about ten years and here we are.
I came to Texas not knowing any Spanish.
Now you know also.
I’m working on it. Hola. Banyo.
Is there a banyo around here?
There’s a big one. Don’t laugh.
George, you do Airbnb. You’ve taken the city by storm and crushing it. Why don’t you give us some data points on how many listings you got and we’ll talk a little bit about the breakdown between ownership and rental arbitrage?
We started off with the rental arbitrage and we jumped on to two listings back in 2018. At the beginning of August of ‘18, we utilized the wholesaling fees to put down on these two and stage them. By then I already had eight contracts and leases set up and in one building. We persisted and worked hard to get these eight leases. I was excited to start the business. I had learned about it not even 2.5 months before. By the end of August, we had ten arbitrage listings. We ended up having about fourteen by the end of that year and we’ve more than scaled our portfolio to 35 now from 14 at the end of ‘18.
That’s not bad.
It’s more than 100% growth. It’s amazing.
Most of it is the arbitrage but you started to buy properties now. Tell them the difference between the way we do Airbnb and the way you do, the main difference.
The main difference is, in arbitrage, you are leasing or renting a property from a landlord or property manager and after you lease it, you make sure you always have that contract and waiver. You stage it and you list it on Airbnb to lease. Instead of buying it, you’re not going to put it down or own the property and you’re able to list it on the Airbnb platform and make the difference. That’s the arbitrage. It’s the difference between your gross minus your expenses and your rent.
That’s amazing too because we’re talking about a much lower entry point. What do you say the average is to get started in rental arbitrage?
I got started with $5,000 in property and that’s with a $1,000 lease, $1,000 deposit, and paying labor for about $500 to $750 and the remaining $2,250 for the essentials like electronics and to stage the entire property.
We’re comfortable in saying $10,000 to get started. They’re not all hustlers like you. They’re going to overthink and overspend.
You can do it with $34,000 if you do all the work yourself but it’s going to take a little bit longer. You get a nice little studio with a 1 or 2 years lease. I recommend a higher lease. Going two years is a little bit better because you’ll never know when the landlord might say, “I don’t want to renew.” To make sure you are always protected and having that first right of refusal is one of the strategies that we use so we don’t get kicked out.
Jason, he’s given himself a two-year payback period. Instead of being cut off at one year and the landlord saying, “I see you’re listed all over the place. This looks great. I’m going to do it myself.”
“I’d like to have that back now, please.”
“Can I have it back if you’ve built that out?” That’s good.
There are a lot of refusals. Even if you didn’t break the lease, you have the first right to get 3 or 4 years on it if you didn’t break the terms on it.
What is your typical payback? What have you seen as your payback?
I’ve been in about 10 to 12 months.
Is it less than a year?
Yes, but it depends. Some of the properties we’ve kicked off with maybe 1.5 years. That’s good.
You get 100% return inside of twelve months so the rest of it is gravy at that point. It’s not bad.
Where do you do your arbitrage? You mentioned a studio so that’s on the house. Are you renting apartments?
We are renting apartments, condos, and houses. We have one house that we rent and the other four are apartments in smaller buildings. We haven’t gotten to high-rise and things like that because the margins are a little bit lower. There’s more completion.
It’s $1,800, $2,200 for the high-rise tower rents.
Downtown, Montrose, and Midtown.
How’s it doing in Montrose?
The Montrose ones, the leases are anywhere between $800 to $850 for those properties and they’re bringing in $1,700 to $2,000 so some of them are $2,000 to $2,500. We haven’t gotten to $3,000 yet but you never know. The city changes and the growth in that area.
Where would you not go at this point? Are you doing beach properties? Would you do Galveston, Surfside where we’re at, or Corpus? Would you do any beach properties?
I would definitely do beach properties. They’re seasonal.
It’s a 6 or 7-month window.
We have one in Galveston. We still have it.
Got it, us too. Thursday night from 10:00 to 11:00, you’ll be able to catch George on The Answer 1070 AM in Houston. You can catch him live streaming as well on the website. I’m sure you’re going to bring some of your students and your team on and they can share some great insights so that should be good.
Let’s go in a little bit further into rental arbitrage and I’ll explain it and you correct me when I’m wrong or pat me on the back if I’m right. Essentially, we’re going to go and find a landlord who’s got a property, an apartment, a condo, or townhouse that says, “I’m leasing this. It’s a typical one-year lease. It’s the first and last deposit.” You’re going to go to them and say, “Mr. Landlord, I’m interested in doing this but I want to let you know that I’m going to be subleasing it as an Airbnb. I’ve done this 37 times. We do it well. I’d like to sign a two-year lease with you.” That’s basically it.
If we do that, there could be an objection to the landlord’s side.
How do we get around that?
First, tell them the benefits. What I do is if we’re calling, we’ve got a process that we’re going to show to you in the actual class. We’ve got a process that allows us as future Airbnb hosts to propose and pitch a realtor that’s going to pitch to another realtor, a landlord directly, someone that owns a property or a property management company that has control or owns certain property. Whichever you pick, you always tell them the benefits first. What are the benefits going to be of renting a property compared to a long-term tenant?
One of them would be, “I’m going to have your property maintenance and cleaned every single week.” A long-term landlord will never clean it. A dog will piss on the carpet, there are leaves, and there are a bunch of holes. You rent it and maintain the property because you have to deliver it to your guests in the best condition possible. It has to be cleaned at all times so you’re going to maintain the lawn. You know the headaches. You are landlords for long-term tenants. Working with an Airbnb host that is a professional has its benefits. You tell him the benefits first. After that, you tell him exactly what you’re going to do. Don’t hide it. Don’t try to go around it. You pitch it and say, “Are you interested? I’m ready to go. Here is my stuff and my website.” If you don’t have a website, make one on Wix. That’s probably $30 or $40. Those are a couple of pointers.
We are going to disclose what you’re going to do in a way that expresses the benefits. That’s good. That’s rental arbitrage. If you’re paying $1,000 a month, you can get your Airbnb over $2,000 if you’re taking the difference. It’s perfect. Talk to us about the BnB Cash Flow Mastery.
The BnB Cash Flow Mastery is a concept we came up with. We’re going to teach you exactly from A to Z how to take zero properties, how to enter the space as 1 of the 3 models, which is cohosting, managing someone else’s property, going into rental arbitrage, or buying. You guys are experts on purchasing and ownership and buying. I’ve done plenty of arbitrage and we continue to grow and I love to model. Managing or cohosting is the easiest thing and it takes no money. Taking you through that process on how to do it from zero on how to pitch the landlords, how to find the properties, how to analyze the numbers because that’s important knowing your numbers. You’ve got to be on point otherwise you are not going to succeed if you don’t know your numbers. Not every property is good for Airbnb.
We deep dive into teaching how to build a team and what departments that Airbnb has. Also, what you can do with these teammates or departments and how you can pair them up. It could be virtual. You could hire guys out of the Philippines as virtual assistants. Build your team like that as long as you’ve got somebody here on-site or wherever you’re managing your property. We deep dive into the actual listing and how to create it. Also, what are little pointers on what things you need inside that listing to be successful like your title, your photos, and the descriptions? People don’t even know sometimes, “What do I put on here?”
We’ve got a professional copywriter that helps us. She’s way better than we are. At first, I didn’t know that there are little things you need to put on those listings. For the automation software, we show you how to work them and what to implement. We’ve got awesome processes and systems that we’ve created from scratch. With the automation software and the processes and systems, we combine them and it enables us to scale. Eventually, as we take you through this journey of learning from 0 to 5 to 10 properties, we’re able to help you scale it, take yourself out of business a little bit, and continue to build as you grow.It is essential to maintain the Airbnb property because you must deliver it to your guests in the best condition possible. Click To Tweet
We’re going to do this two-day class. On day one, we’re going to show you everything that you need to know to set up a rental arbitrage Airbnb. We’re going to talk about how you find it, how you negotiate it, the right way to sign the lease, where you find the furniture, and talk about who you work with to get it all set up. That’s day one. Day two, we’ll go through all the technical stuff that you were hitting on point after point. Who needs to be on your team, technical writers, photographers, and all that stuff lined out. It will be laid out completely. There should be no questions left unanswered, which is a big thing when Jason and I do our education. We don’t want it to be one of those events where you show up and you get a little bit of knowledge. There’s a guy in the back of the room trying to hit you up for $50,000.
One of the things we’ll do that we do all our classes is we say, “At the beginning of day one, what are the questions you have?” We’ll write all the questions down and we won’t leave on Saturday until everyone who’s been there has gotten all their questions answered. They should be able to walk away with the blueprints on how to get started. There will be some hand-holding and we can do joint ventures and all the other stuff but for sure, if you come to the second day, we’re going to go through everything you need to understand about how you’re going to set up a rental arbitrage on day one.
On day two, we’re going to go through all the technical stuff, the back end of Airbnb, who you’d work with, how you can maximize your numbers on that. You’ll be able to walk away that weekend with the understanding of getting this thing started and that’s our big goal. Nothing is held back. Every question gets answered so you can come and you feel like, “I’ve gotten everything that I was supposed to get out of this.” There’s nothing more disappointing than spending a lot of money going to an event and not having any of your questions answered. That’s a big problem. We’ll take care of that for you. We’re excited about that. That is The BnB Cash Flow Mastery. It is a fantastic event.
A lot of people in this town will do well by showing up and moving forward with us. We’re going to make sure that Taylor goes ahead and puts the copy up. It’s up there on MRTXRE.com. Go to education and you’ll see the link that says BnB Cash Flow Mastery and we’ll also post it out on Facebook. We have the Q&A coming up which will be another great night. We’re trying to answer all your questions. We want to pump it all out there so you feel comfortable that you’re not going to get lost in this, get frightened, pushed away, and lose money. We want to prevent that from happening. We’re excited to be working with George. We’re happy to have you on board. If you have any questions, you could go ahead and text us at (281) 401-9008.
George, when Airbnb gets in the news, it’s usually because something bad happened and it usually stems around someone not following the rules. I’ll tell you two things. I’ll tell you my horror stories. One, we had a guy who stayed long for an Airbnb. It was 30 days and he renewed for another 30 days so he’s in this room for 60 days. He’s doing some IT work or something like that. He’s doing a little drinky-drinky every night and there’s a fireplace in the room. He decides that one night he’s going to go out and start a fire. Instead of going down to Home Depot and buying the logs or any of that stuff, he wasn’t in Texas so he couldn’t go to HEB. He was going by the log and something like that, he went in the backyard and started pulling up branches from shrubs and stuff.
He shoved dry pine needle branches in the fireplace. He turns it on and lights it and they all go up and now I got this big smoke scar up the wall. The smoke detector goes off. The other people in the house are freaked out. We’ve got people that are like, “Is there a fire?” The last thing we want is for the fire department and the police to come because we’re going to go on their list. The more they keep coming, they’ll start charging us for false alarms. They didn’t come but my partner was ten minutes away and ran by. The guy got a little lonely and a little too much time to himself sitting in a room with a quarter of Smirnoff. That wasn’t good.
We have a specific for no parties. This is not for parties. This is business travelers preferred. This woman clearly had a party because we have a ring doorbell so we were watching all these people standing on the porch, smoking weed, drinking beer, and stuff. We’re like, “What’s going on?” My partner who deals with all the back office will talk more about that. We called her and said, “Those people got to get out of the house. You told me that there are going to be two people there.” She’s like, “What are you talking about?” He’s like, “I can see you on the camera.” She’s like, “That’s an invasion of my privacy.” He’s like, “No. It’s on the listing. It says that there is a ring doorbell and we will be monitoring who comes in and out for your protection.” She got everyone out and the next day she left. Here’s what’s crazy, George, she wrote us a five-star review.
It cost $1,700 worth of damage which we went to Airbnb on and Airbnb paid us for the damages. There’s no smoking in the house. There were cigarette stains, burnt marks on the rug, trash sheets, lots of unnecessary garbage, beer cans, stains on the wooden floor. Airbnb looked at all the pictures, went through the whole thing, and got $1,700. That was the first time I even realized that there was some system but you’ve already built that into your business. That’s part of your model. Maybe you can talk about where you’re able to get your damages back because everyone freaks out about, “Are they going to trash your house?” At some point, someone might, but there is an avenue to get that recourse. Why don’t you talk a little bit about that?
I’ll tell you a little bit about a couple of my experiences. We’ll go into how to prevent them, know what to do about them and if they do happen, and how to go around the experience, or whatever happened and recover every dollar that you’re spending. Even what it costs to repair with an extra on the contractor’s side. One experience that I’ll never forget is my team walks into this property. It’s a two-storey condo, and the entire house is trashed. I’ve had three incidents similar, but this was the worst. Out of 37 and out of 2,500, we’ve had only three. They do happen but they seldom happen. We walk into the house and this entire house is messed up. There’s trash everywhere, the rug is in the garage, wet. They blasted the fire extinguisher. The mattress is stained, there are drinks, cups, and a bag of cocaine.
I’m like, “These guys are crazy.” They don’t respect your house. I don’t understand how people can do that. They didn’t even clean it up. The mattress and the comforter are messed up. There are drinks in the dressers. It took my team about two days to clean it up and they were three people. What we did is we turned around and filed it immediately. We’ve got a system that we built that goes around so we don’t affect our own personal reviews or your business reviews. We’ve figured out to go around and make sure that we don’t get those bad reviews. What we did is we filed a claim and it took Airbnb four months to pay us. How did they pay us? Why did they pass up to four months? They didn’t want to pay us. We had to follow-up. The system we built allows us to follow-up and we’ve got certain follow-up dates to put things in place. There’s a person in charge. Step one is defining your rules.
These are the house rules. There’s no smoking, pets, parties, and deep-frying.
We have a list of fifteen other house rules. We know a lot of things people don’t know. What you tell them not to do, sometimes they’ll do it on purpose, but sometimes they don’t know so you ask them to make sure they’ve read them before they book. You create these house rules that are implemented and have certain fees so they’ll less likely do that. They may have seen the difference between before the house rules and after we created the house rules. It’s a big difference.
Do you list the fees too, so if they’re smoking, we’re going to charge this?
Yes. We’ll bring it. I’ve got the entire list. You anticipate by implementing these rules and if they do happen, there’s a way that we can go. It’s simply to file a claim after the review and wait and follow-up to make sure that you get paid. We’ll dive deep into it when we do the Q&A session. If you want to know how we make money through these claims and accidents, we’ll discuss that a little bit more.
We’re talking Airbnb and short-term rentals. We’re seeing a surprisingly good February. We were a little shocked at how good February was. In 2019, February was sucking wind for us. We hope that all you out there doing Airbnb are seeing some great Februarys. If you are interested, make sure you join our group. It’s Mr. Texas Real Estate – Jason Bible and Robert Orfino on Facebook. Two questions but getting that group is stuff coming in from George and we talked a little Airbnb there. Go to our website, MRTXRE.com and if you have anything, if you have questions about what day the events are on, you want to come out there, text us at (281) 401-9008. Go ahead and text us and we’ll get you the information on the event so you can show up.
George and I are talking about Airbnb cashflow. Let’s say cashflow of rental properties versus Airbnb. Let’s say standard rental property here in Houston, maybe we are talking about your Airbnbs. What do you think your Airbnbs would rent for a net-net like $300 or $400 a month if you got a mortgage on it?
Are you asking me for the rent?
You’re leasing these properties from these landlords. What’s the average rent or lease rate for the properties that you got?
It’s $1,000 a month.
This is going to be tough because Airbnb is variable. What’s the average monthly gross rent for your Airbnb?
For the majority of my downtown properties, they’re going to be anywhere between $2,000 to $2,500 and that’s okay. Most of these properties that I got at the beginning, you can find $3,000 to $3,500 now. The majority of mine are $2,000 to $2,500 and we’re okay with those, but depending on what area. If you rent $1,000 depending on the building and the area, that’s $2,500. On $2,500, you’re sitting good, but you want to minimum $2,500. My actual criteria are no less than $2,500 and if we hit $3,000, great. We’ve got several properties after we did this whole wave that is $3,000 to $3,500. Those you can cashflow much better.
You’ve got a house here. You can make $1,000 a month or you can make about $2,500 a month doing Airbnb instead. What are your net-net expenses out of that? For $2,500, you’re going to have the $1,000 lease, now you’re down to $1,500. What other expenses are you going to have?
On our end, we’ve got the cleaning. On these types of properties, we have in-house cleaning so you do about 10% on cleaning and that’s going to be based on 7 to 10 bookings for that month.
That’s $250 there. What else have you got?
You’ve got supplies and that’s an average of $50 a property.
We have utilities so utilities for small studios and it all varies. This is an example of most of our smaller listings. We would go to a house, we’ll talk about a two-bedroom that we have. We’re basing it on the smallest thing. We have 18 or 20 of these types so the cashflow is okay.
This is an average example. What about utilities?It's not hard to do three Airbnbs, but more than that may draw you to hire a manager. Click To Tweet
You’re going to say, “The utilities are cheap because in most of these small apartments everything’s going to be included.” The only thing is electricity. Anywhere between $50 and $75 for electricity is small.
Let’s call $50. We’ve got $350 here minus $1,500 which put us at $1,150 net-net a month. That’s not bad, $1,150 a month and you’re leasing this thing. For this particular type of property, a little studio apartment, what’s the total out-of-pocket because there are a lease deposit and a deposit for all the furniture and all that?
If you started this and go with two studios that are 600 to 700 square feet and you do your shopping for your furniture, you look for the best and most economical. You can go a little lower end so you can make it with us as low as $4,000.
With furniture and everything else, you’re going to have to put a lease deposit down. You’ll get some of that stuff back. Do you think $7,000 is a reasonable number?
You’re $7,000 out-of-pocket and it’s bringing in $1,150 per month, that’s a payback in about six months.
Let me throw you a couple of examples. Six months is doable if you yourself as an investor jump out and do three Airbnbs and you’re going to manage them yourself. It’s not hard to do three Airbnbs, but when it gets to 5 to 10, that’s such a headache. If you as an investor are doing this exact model you’re renting out, you can make $1,000 to $1,200 but if you are scaling, you’re going to have management fees and other stuff.
What’s fascinating about this model is people keep talking about wanting to go in and start flipping houses. I’m like, “Don’t flip houses. Why don’t you buy a couple of Airbnbs?” You can do five. It’s reasonable. Five is probably about the max. We had five of these things over here so that’s $5,350 a month. If I have $5,350 a month coming in from five of these and it cost me $20,000 out-of-pocket to buy a single-family house with leverage and increase my number of rentals, all I need is four more of these things. All I need is every four months I buy another house, another single-family rental property. Does that make sense? One of the biggest issues I see in real estate is the lack of liquidity or enough capital to buy the next deal. In Airbnb, cash flows well that why not have five short-term rental properties run through Airbnb. We’re making $1,150 a month. Get five of those, you’ll be making $5,350 a month and you’re taking those dollars every four months and you’re buying another house.
That’s perfect to the tee formula of how you can scale this type of business with 3 to 4 properties and go one by one. The other year it was 7 and 8 and in another year 14. We’ve doubled our portfolio and in less than a year from 14 to 35. This is purchasing some using private money and all that but the rental arbitrage, you keep adding. That includes paying myself also a small salary. I’ve got a team of managers, operation managers, good bookkeepers so we’re operating this as a legitimate business with our office.
I like this model for growing your business and one day if you get tired of doing Airbnb, you take it off Airbnb and put it on as a full long-term rental. The only thing I would add to this and it’s going to be, “If you can get away with it from the landlord.” I would add an option here if you can.
That will work with the houses.
It works with condos but it won’t work with an apartment you’re renting. That didn’t work there. You can get an option for the whole apartment building. I would get an option here in the future if you decide to buy this thing. You take the cashflow that you got from Airbnb and come back around and buy that property.
It takes a smaller amount that you’re putting up and you can get that back if you decide not to, I don’t think so.
You could do a $100 or $500 option or whatever they’d be amenable to. Here’s what’s great about these options, let’s say market value’s $100,000. I’ll say, “Here’s the deal, I’ll do a $100,000 option, that’ll be a five-year option for $100,000.” If this market appreciates rapidly, this house or this little condo is now worth $120,000, go ahead and execute the option to buy it for $100,000. You immediately pick up $20,000 in equity which is a nice way of saying you grab $20,000 in net worth because that’s what’s happened for free. Essentially for whatever the cost that option was. That’s one of the things that I like about Airbnb. You can back into a rental property by doing Airbnb and buying that property back in the future.
- George Salas
- The Answer 1070 AM
- BnB Cash Flow Mastery
- Facebook – Mr. Texas Real Estate
- Mr. Texas Real Estate – Jason Bible and Robert Orfino – Facebook group
About George Salas
Hi, my name is George Salas and I am a Real Estate Investment Specialist
My team and I empower property owners in distress, by partnering with investors and young entrepreneurs to achieve their real estate goals, in both the residential and commercial space.
I got into Real Estate because I wanted to change my life, achieve financial freedom and empower others to do the same. What I love most about what I do is seeing the relief that my clients experience when they finally sell their properties AND the smiles that investors have when they close on a high equity deal.
I also love coaching young and hungry entrepreneurs. Many of them want to break into the real estate industry, but don’t know how to start WITHOUT using their own cash or credit.
When I’m not working I love to play soccer, spend time with my family and travel back to my home country in Peru. The best way to reach me is by visiting my personal website GeorgeSalas360.com