Airbnb – An Alternative To Real Estate Flipping

Airbnb as an alternative to real estate flipping

Real Estate Investors have long been interested in finding new ways to make money in real estate. In recent years, buying properties wholesale, fixing them up and selling them for a profit has become all the rage.

Commonly known as “flippers”, these real estate investors that use this method are saying that it is becoming harder and harder to find good deals, especially in California where real estate prices are continually rising.  Gone are the days of making $100,000 on a flip. Now, profits are closer to $30,000. Not bad, but the competition is getting tougher too as more and more investors jump into the flipping game.

Another downside to flipping properties is that once the deal is done, you need to go out and find another one. Many investors who have been flipping for a while are getting tired, they are ready to just buy and hold and enjoy some steady, passive rental income.

However, the trouble with long term rentals is that in California, landlords are subject to tenant law, which strongly favors the tenant in a dispute. These disputes, if they go to court, can drag out for months. Months where the tenant does not have to pay the rent until the dispute is settled. And, there are those tenants who intentionally use the law to their advantage to live rent free as long as they can. This is the risk a landlord takes when they decide to rent to long term tenants.

Enter – Short Term Rentals – the newest higher-and-better-use for real estate. By taking a property and simply furnishing it, an investor can rent it to short term guests and begin to see much higher returns than they could get from a long term tenant. Typically rents are two to three times higher!

Let me tell you about my friend, John. He owns a 2 bedroom, 2 bath house in Rosemead. The long term tenants were paying rent of $1,200 per month until one day, they just stopped. The eviction process began and they were not happy about it. They did a lot of damage to the house before they moved out. So, after six months of lost rent and repairs in the tens of thousands, John decided to turn it into a vacation rental instead. It was the best decision he could have ever made.

The vacationing guests pay for their stay in full in advance. The property is maintained in clean and pristine condition at all times. John is able to come and go in his own property whenever he likes and he even provides a place for his family and friends to stay when they come into town for a visit.  And the best part is that his rent checks average $3,000 per month. John truly has the best of both worlds. He gets steady, higher-than-market passive income and he is no longer subject to tenant law.

John is a hero in my book.

Maybe it’s time for you to explore the concept of short term rentals a little more. Take this survey to see if it’s right for you.

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