The Fast Path To Financial Freedom -How We Did It In 1 YR w/ STRs

[Michael Elefante]

My wife and I were fortunate enough to reach financial freedom just one year after making our first ever real estate investment. Here is a quick background story on our success and some tips and tricks I feel that anyone could use to maximize their cash flow potential using short term vacation rentals on sites such as Airbnb and VRBO. In November and December of 2020, we cash flowed over $14k/month between just 3 properties (most of which came from just 1 property!) 

5 years ago, we were both working at Dunkin Donuts and Domino's respectively. Fresh out of college, we moved to Dallas, TX to take on entry level jobs making very minimal amounts of money. We both side hustled on the week nights / weekends. I worked at a vineyard pouring wine and cutting cheese! We wanted to invest in real estate, but just didn't know how to get started. We decided to focus on our earnings... So we side hustled and earned a few promotions and changed jobs (and locations - Dallas, Austin, Nashville) a few times to boost our earnings to fast track us to our first ever investment. Along the way, we learned more and more about short term vacation rentals and in the fall of 2019, we put a down payment on a single family house in Nashville, TN with plans to furnish and list as an Airbnb. We listed in December 2019 and by March 2020 - things picked up very quickly. We were scheduled to NET over $7k in cash flow in March... Then COVID happened.. We had over $30k in cancellations in less than two weeks! We adjusted our pricing to accommodate longer stays and go through the next few months, before travel slowly picked back up. We were net positive all but one month thankfully throughout the harshest months of 2020.

We acquired one other property in Nashville in May 2020, which has done 'OKAY' - struggled with lack of travel through 2020, but we are seeing things pick up drastically in 2021. 

Fast forward to our most successful investment in September 2020 - a mountain house/cabin in Gatlinburg, TN. We purchased a cabin that was passed up by many other investors, because it needed cosmetic rehab - new floors, stairs, paint, etc. We listed on Airbnb on October 15, 2020 and had over $29k in bookings within the first week. We ended up cash flowing $4,600 in October (half a month on Airbnb/VRBO!), $9,900 in November and over $13,000 in December on this ONE property alone. Yes - I realize the fall and holidays are busier for STRs in this area, and January and February are not near as fruitful, but March and beyond are looking very strong and we should see similar returns. This one property set us financially free by itself. 

The average monthly cash flow forecast for this one property is over $6k/month. We purchased this house at $550k. It should gross around or above $125k during the first 12 months on Airbnb. It sleeps up to 16 guests. This property has been great, and while our traffic in Nashville in 2020 was extremely low due to COVID, the mountains, lakes and beaches have been booked solid - with people looking for regional vacations they can drive to.

Things are picking up in a big way in Nashville, still not back to normal, but picking up nonetheless... Our larger Nashville property - we cater to bachelorette parties and special occasions and IMO there is one MAIN reason we are booking up so fast in 2021 - a mural in our living room... It is an interactive mural that has Nashville written above it - and people book this place because of it. 

I have realized that in the digital age we live in today - it is important to create 'instagrammable' moments in your short term rentals - to cater towards the clientele you are seeking to book your rentals. Booking a vacation rental is an emotional decision and people will convince themselves to pay more for a place that tugs at the emotional strings. This one Nashville property has over $73k booked in 2021 and still has over 230 nights available to book! We purchased this property for $495k back in October 2019. I credit most of this to that Mural. We are able to book at a higher occupancy and at a higher nightly rate then our competition in the same area. We should gross over $100k on this property and cash flow somewhere between $30-40k for the year, once all expenses are paid.

For the mountain cabin - we did something similar. We went 'against the grain' of the typical cabin in the area - which are typically all wood, rustic and have not had much updates in many years. Not that there is anything wrong with that, but we wanted to stand out on Airbnb and VRBO. We went with a modern/rustic theme - added string lights in the back yard, black paint on the stone fireplace, and a mix of modern and rustic furniture and light fixtures, etc. In order to do that in saturated markets, you need to do the following:

1) Your first 5 photos need to STAND OUT on Airbnb... It's all about click rate. Does your title and main (first) photo get the click to your splash page? From there you have 5 photos and a description to grab the attention of the potential guest to get them to 'see themselves there'

2) Create 'instagrammable moments - this could be an interactive mural, a very well done outdoor or patio space, unique rooms within the house. Look on Airbnb at your competition and you will realize most of the properties blend together... How can you stand out? Your instagrammable moment will likely be your first photo on your listing page. Spend a little extra furnishing budget money on the areas that will be in your first 5 photos - MAKE THEM STAND OUT! It will pay you back in dividends over and over again. 

3) Use social media as free (or paid) marketing. We use an Instagram and Facebook page for all our rentals. We post every once in a while and even ask our guests to tag us in their photos. This is all free marketing. If they post a photo, their friends will ask them where they stayed and could be a future guest... 

4) Use tools like Pricelabs to maximize your earnings potential. You can create customizations based on what you want to have your average pricing at, set min length of stays beyond a specified # of days, etc. It will then adjust your pricing based on demand. This tool has helped us maximize our bookings and $/night we capture. 

We just acquired our 4th property in January 2021 - we are doing a more involved rehab on this one. We acquired at $499k, it appraised for $575... We are turning the 2 car garage into a theater room, redid much of the flooring in the house, added a sauna, etc. The ARV should be around $700k and this property should gross over $125k/year on Airbnb as well. Also located in Gatlinburg, TN. We went in on this property 50/50 with another investor. Certainly a strong equity play in addition to the cash flow :) Should be live on Airbnb in march.

By the summertime, we expect the combined cash flows from our properties to exceed $20k/month. Looking back on where we started from, both working at fast food restaurants, I am honestly in disbelief and extremely grateful. I am thankful I was introduced to real estate and have met so many amazing people along the way. Many of whom I met here on BP! 

I truly believe that short term rentals are the fastest path to financial freedom. Even if you have little or no money - you can get started doing rental arbitrage or co-hosting. Additionally, I encourage you to focus on your earnings and side hustle if you can to save up money for a buy and hold investment. 

Please drop your questions or comments below. Are you all seeing similar success in other regional vacation markets? What are your strategies to stand out amongst the competition to get more bookings and earn more $$$? 

Cheers to a great 2021 and beyond!

[Mike Dymski]

From cutting the cheese to counting the cheddar!