There are many strategies for building wealth and portfolios, but the number one strategy is putting your money to work for you. Millionaires have an average of 7 different income streams, right? Here’s a secret: real estate investing is one of the top non-traditional income streams that can help you build your wealth and is a great first step in diversifying your portfolio.
Short term rentals and vacation properties in particular have a low barrier to entry, are growing tremendously, and are not as difficult to run as you may think. Becoming an AirBnB host may get you to that first $1 million faster than you think. Here are 5 reasons why being an AirBnB host should be your next financial move.
Vacation rentals are a growing means of travel accommodations, especially among Millenials and Gen Z:
Travelers have different desires today than of the past, including access to a kitchen, more space, and unique living quarters. The vacation rental industry is projected to continue growing at least 10% per year, and vacation rentals fared better during the pandemic than hotels. It’s likely that renters are going to want even longer stays as the pandemic and remote work has opened up opportunities for more travel and flexibility of location in the future.
It’s not as capital intensive as you think:
Even with interest rates rising, mortgage rates will continue to be at an all time low. A small cabin in the woods, or a modest single family does not require 20% plus closing like you might think. Many banks are accepting 5-10% down payments. Raising private capital, like a friends and family loan, is also a great option if you can prove out the future rental income stream.
The wonderful cycle of free equity:
Not only are you paying down your mortgage with rental income, but if you’ve sniffed out a market before it’s too hot, you can gain free equity just by the value of your home going up over the years you own it. Websites like AirDnA are designed to help you research the next hot short term rental market so you can analyze future cash flows, rent and home values. Even better – once you’ve built enough equity in your house and through the profits you’ve built up in rental income, you’ll have made enough to invest in a second property, and then a third, and so on.
It’s a semi-absentee side gig and can be done remotely:
Depending on how far you go with investing in property management help, you can run this business entirely hands-off or in a semi-absentee manner. Managing a short term rental property can include messaging guests, coordinating cleaning schedules, and scheduling a handyman for repairs – but all of this can be done in no more than 10 hours a week and completely remotely. Some folks even manage AirBnBs from a different state. My husband and I have managed two properties in New Hampshire from Massachusetts for the last three years, and we’ve both worked full time corporate jobs during that time. While our end goal is to be full time entrepreneurs, we were able to cover the management of those properties without feeling like our personal life was squeezed.
Exercise a different career muscle:
Setting up your first AirBnB will allow you to not only diversify your portfolio and grow your income streams, but you will also scratch that creativity and curiosity itch. Building an AirBnB business requires knowledge across operations, marketing, finance, real estate, and many other professions. Running your new small business will build skills you never thought possible before – which is great for your career and for building even more income streams.