Why new construction is by far the best airbnb strategy
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- Опубліковано 3 жов 2024
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I design floor plans for unique/luxury Airbnbs and can tell you that you're right on time. This is the direction STRs are heading. The pros of building FAR outweigh the cons, especially when it comes to a sustainable business and max revenue.
Hey man, do you have a website or email? We’re currently building STRs and we agree design is where you stand out. Thanks!
I mastered the design of houses 😅@@pshahen21
I also design/build architecturally unique short term rentals where the design IS the strategy to beat the competition.
Yup! I just did this over the last two years I bought a piece of land and built a single family unique STR as well as a Dadu that's also an STR. All in I'm in $750k to full develop the parcel and it just appraised yesterday at $1M.
Sounds like the perfect scenario to get all your money back! How much did you put in and how did you fund it?
@@Robuilt came in myself with $250k, $500k financed through a private lender. Tracking to be 100% paid off from STR income by end of 2025. Not sure if you saw Kai's video on my place but he came out last year. My whole channel is about how I build my homes/and my IG blew up from my container build (thepacificbin) which is helping to keep occupancy around 90% at high adr.
Build new! 100% the way to go if you want the best return! I’m in vegas and it has worked astoundingly well for me. I will be doing it again. 👍 $1.2M build, bank appraised it at $2,050,00.
If I can buy land and built a house for 900 000 that's worth 1.5 millions I would do this non stop. This is an insane 70% return. Companies that focus on new built make nowhere near those return. With those kind of return the market would get inundated with project.
This is the strategy I use as a builder to build my portfolio. Build with cash, at a discount since I am the builder and dont pay a GC fee, cash out finance at the end and STR it. Great strategy to build wealth. Can also do spec builds to create more capital when needed, which helps with not needing so many partners/investors for the cash. I dont like sharing ownership of my real estate.
Yeah, this is mega solid. I've known a few builders that do this. It gets supercharged when you've got a great relationship with a bank and they extend a huge line of credit that allows you to build multiple houses that you can either then sell or cash refi out of.
You mred to be building a primary every year if you're married or have a family member to live in one. Every 24 months you sell the primary tax free. All the business tools are expensed and bare bones CO allows you to finish it right before sale or upgrade before sale.
Wife didn't want to move every year until I said the kitchen and master closet would be the same in each one. Send her for a spa day and have the movers take everthing from the cabinet and put in the same cabinet I. The other house.
Couldn't agree more. We got stomped placing offers in the Smokies in 2021. Kept putting offers 50-75k over asking and losing.. we gave up after about 18 offers.
We ended up doing a 4/6 pool cabin and it took close to 19 months. While we missed our on the cash flow from 2021-2023, we got about 300k in equity and got exactly what we wanted.
Our spread was not quite as good as Robs, but still worked out to be a good deal and is looking to crush our underwriting estimate.
Dude a $300,000 spread ROCKS. That's amazing. Congrats. Out of curiosity, why did you end up going with 6 bathrooms, 4 beds versus a 4/4?
@@Robuilt we were limited to 3 full baths due to septic permit. Original plans had two more half baths. One half bath in the main living area (kitchen/living room). Another half bathroom in the theater/game room, but we wanted a cabana bathroom in the pool room so folks wouldn't have to leave the room to get changed, etc.
We actually used your referral code to get started on Airbnb. 🤝
RockyCreekRetreat - ez to find on Google
@@Robuilt it was limited to 3 full bathrooms due to septic permit. The original plans had two more half baths- one in common area, one in theater/game room. We added one to the pool area as we didn't want folks having to leave the room to use the restroom.
The square footage easily supports a 5 bedroom with one more full bath, but the septic limited us to this figure.
Not mad tho.. we are on track for 180k gross in 2024.
I’m really proud of all the mental math you did in this video Rob. 👏👏
Failed to mention, when you pull that $1.2M out from the bank and put it in your pocket, that “free house” has a $10K/month mortgage attached to it. You gotta make that payment each month.
Super fair. I thought this was clear. I consider this a "free house" in my book. I invest money to build home. Then cash out refi to get all of said money back. Meaning no money in the deal. But I suppose a TRULY free house is one where it's owned free and clear. So I could see why someone could be confused by my loose definition of the term "free house." Although I'd say that a good chunk of the real estate community would agree with my way of thinking.
@@RobuiltIf you're then using that money to build another house, you would be building a portfolio of homes, but then each home will have that monthly mortgage attached. In a market where house prices are not appreciating, or at worse falling, you won't be making much real gains. Especially if you have a high mortgage burden. In a poor rental market you might start missing some payments and then there would be trouble.
That was EXACTLY what I was thinking 😅 when the word "free" was used but I see where he is going. You take a loan out to build and instead of letting that construction loan just sit there, you make the "equity" in the house available for other investments by doing a HELOC. Actually a great strategy. I am anxious to get into the Airbnb business and would not want to spend this kind of time to get going, but if I can get established and start bringing in solid figures I would definitely do this. I live in a state where there is a ton of land available to purchase and build on with some amazing views and waterfront opportunities.
My ex gfs dad daisy chained a bunch of houses and we used to get his mail sent to our house. She would open them to see multiple houses he was losing, I'd see bills from 200k- 600k being sent to the house every month.
Building new is 100% the way to go. After our first Airbnb we stopped buying retail and have built 10 since then. We are seeing new builds at 30-40% less than buying retail. Plus you can design it exactly how you want to. Which is huge.
Do you refinance to get your money out? Or how do you have so much money to just build so many?
10?! That's rockin' dude! That is one of the things I love about this model. You get to thoughtfully choose layouts and amenities, versus having to retrofit funky houses.
One downside is if you are in a congested area and the new construction is on the other side of town. For example, in SE Charlotte, NC, there is no more "room to build" in this desirable side of town. So a lot of the new construction is in cheaper areas of town which are much less desirable. I guess it depends on the location. I'd have nothing to do with a any homes in N Charlotte, NE Charlotte, W Charlotte or NW Charlotte. That is where all the new homes are being built because those areas have cheap swaths of land because it is undesirable. Maybe in 10 years?
Is that 30-40% discount after paying a GC or are you your own GC? I like the idea of this model but would need to pay a GC and then need it to still be worthwhile. But if I could still get for 30% under retail then it sounds like a great deal.
@@jonpayne4319 we use a builder but get discounts on their fees since we are active and give them a bunch of business. Could probably go cheaper if we GC everything but it’s a bandwidth thing.
this strategy requires a lot of upfront capital/equity. Currently getting construction finance is difficult. Construction costs are sky high but bank valuations are not. If land costs $400k and new build costs $400k the bank valuation will not be $800k and certainly will not be more. It will likely be $700k or less
“Changing the oil”
*me frantically looking for the dipstick on my house* 😂 good stuff man
Thanks for all of the great content that you provide.
🫡
I don't agree with this strategy for most people. Being your own contractor without aby previous experience is not a small task and most people don't have the knowledge or connections to be able to pull it off at maximum profit the first time around. I've done multiple new construction builds and also renovations. I feel like the light to medium size renovation properties are the most profitable. You also have to take into consideration your region and associated costs. There's a lot to consider.
You left out the part where you got a “free” house, but that you OWE $8,255 per month plus property taxes. Can you cash flow that, meaning can you rent it out for about 100K a year? Whats your expected occupancy rate + overnight rate?
Insurance is going thru the roof here in California. Im not buying or building anything in Cali moving forward.
Definitely like the new build model. While a personal sacrifice and takes a toll on a person, you create tax free value and can practice more techniques to retain and nurture the value
Biiiiingo.
When it is time to do the refinance with a big expensive property, the bank won’t give the 75% loan unless the average rents in that area support that 1.25 of the mtg. How are you guys getting around that? I just ended up leaving the equity in the project. Which I’m fine with because overtime I’ll get it back. If there was a way to get it back earlier then that would be a bonus I guess. I don’t regret doing the project.
The audio for this video, when listening on my headphones, is heavily balanced towards left ear only. Not sure what that's about.
Oh weird. No idea. Maybe because I didn't have an editor on this one today who usually fixes this stuff lol.
I’m noticing the same thing - doesn’t seem like I’m getting any right ear audio
On my samsung galaxy S22 ultra sounds really good. The top and bottom speakers are on and sounds like surround 😂
do you make any courses for people who want to start airbnb hosting?
I have the land, plans, and everything needed to build. However the bank won’t give me a construction loan. Where do I go from here
What do you think about the rating showing up on some Airbnb accounts saying”this home is in the bottom 10% of eligible listings based on reviews, ratings and reliability. “What do you think about this and what are they mainly rating this on? Insight? Saw one where their rating was 4.8 and they had this rating?
what about buying new builds
Free gouse meaning you owe no mortgage? Im so lost. They see your gouse us worth money, they let you take out money, you use that money to pay off another house..... But now you have to pay on the house you took out money on ... Without a sale, how is it free? I get yhe leapfrogging but i feel something is missing from this explainer.
There were a couple of places where he misspoke. By free house, he was meaning he didn't have any money out of his pocket tied up in it at that point, it was only loan money tied up in it. Not, that he owned it free and clear.
@@hugh261 what else do you think I misspoke on? Maybe I can clarify,
Here's a video where I talk about this process a little more that does go into a bit more detail: ua-cam.com/video/qpwKHEmG6cY/v-deo.html
@@Robuilt4:25 and at nearly 4:33 it was clarified as there is a 30 year loan. Sorry, after that the mention of free house threw me off. Man .... How autocorrect doesn't save the day with me saying "gouse" is hilarious. Typing it on purpose right now it keeps changing it to house. 😂
How did you find your builder? We are looking for the same type of structure to build in Anza Ca.
Any markets where new construction makes sense other than super high end markets like Califonria, New York and Florida?
It makes most sense outside of those markets haha. The new construction strategy can work in any market where people invest in real estate ;)
Hi Rob I have a question about this strategy as I’m struggling to make any refi make sense with the high interest rates, as a matter of fact I’m doing a live in flip now for a year that I’d rather brrrr out of but I cannot because it won’t cash flow if I refi.
My question is when you refi these new builds and take all that cash out would these properties cash flow as a long term rental (I do str but ltr is always a backup strategy I underwrite for ), or are you strictly underwriting them and doing the refi based on STR projections?
Great question. The answer sadly is it depends.
If the use case is STR, then usually i'm going to make the house a bit more premium-adding expenses across the board. Meaning, it'll be much harder for it to work well as an LTR. But if the use case is LTR, then I'm going to try to be A LOT more budget friendly. Regardless, you have a little more wiggle room when it's new construction because you are getting a significant discount on the cost basis of the home.
If Rob is talking about it, the idea will be old or not longer feasible in a year.
Do you need a lot of cash to do this? I’ve read about construction loans but also don’t have any land. do you have to make this your primary to qualify for those types of loans?
You need 35% of the cost to build for a construction loan if you're new. If you haven't built before you will need a contractor.
That's what I did.
What market?
@@Robuilt latest is WA State. Home isn't finished being built and I've already got equity in the home.
Rob we got to stop with the one take videos!! Your old videos were so hilarious I would watch them just for comedy with the edits!! I miss that!
I don't understand how getting a loan to take out all of your equity solves the problem of high interest rates, and you still have a huge note to pay every month.
You need the money to build the next house.
The rate on a refi is lower than a construction loan. Rent or personal income needs to cover all costs.
You should only have one person on any lease or mortgage. Couples make the mistake of doubling thier debt on a primary. That .eans you can't get a construction loan.
Your audio is mono and panned to left? Just sayin.
City by city they are legislating away AirBnB. There is no strategy that makes sense
By building your own STR you're free to build outside of city limits. When you create an experience-based Airbnb location isn't a huge factor anymore, so you aren't limited by specific areas. This is also how you can find less expensive property, reducing your cost to build. Unique/ luxury Airbnbs are the future of short term rentals, according to the data, which means this is the direction a lot of hosts will be going to stay relevant and profitable in the STR market.
Ignorant take.
Short-term rentals isn’t a new investment. It’s been around for decades.
Actually there's a lot you can do. Many cities only ban STRs in residential zoned areas, but do allow STRs in some conditions or areas that are zoned residential. You can get a property that's not zoned residential. That's what I did - my property is actually zoned commercial and they can't stop me from having an STR. There are lots of vacation areas where places that look residential but aren't. Another is building with a resort community which are typically zoned commercial.
@@MrHamlet today. And that is changing more and more every day.
I am all for new construction and building. But absolutely not with AirBnB in mind. The proof is in the pudding that what is here today will not be there tomorrow.
@@Palantir_Daily Nobody said it is new. It has been around for decades, yes. And with each passing month more and more cities are legislating it into the ground.
An ignorant take is not acknowledging this fact. An ignorant take is "building" a home with the intent of AirBnB knowing that fact.
If you do not know what new construction is.. you should not be doing it LOL
BS. Building a new construction is more expensive and it takes about a year. That’s the opportunity cost. Mislead and misinformed
Not for specific use. And there is a 20-30% margin on new construction so you come out ahead a lot of the time.