How to Analyze a Short Term Rental Investment (The Enemy Method)

so we've talked on previous videos about how there are a number of ways that you can source data on short-term rental performance out there however the data doesn't always tell the entire story it doesn't give the full picture of why properties perform the way that we do so at the short-term shop we use a method called the enemy method in conjunction with the short-term rental data that we get from other sources to figure out how and why properties are performing the way that they perform so there are certain intangible things that data cannot tell you such as the amenities of the property the skill of the manager the quality of the listing things like that so we use the enemy method in conjunction with other data sources to figure out how and why a property is performing the way that it does and how it can be improved [Music] when it comes to rental data and future rental projections based on the data there are a few things that can skew the data one way or the other depending on if there are any outliers in the immediate vicinity of your property an example of an outlier in short-term rental would be if you're looking at a four-bedroom property and there's another four-bedroom property next door that has terrible photos fuzzy sideways you can't really see what you're looking at the property manager the host isn't responsive so the listing is way way back on the search results and it never gets seen that property is not going to get booked and if it does get booked it's going to get booked at a much lower price per night than your property probably will so that's gonna skew the rental data much lower than what it should be conversely if there's another four bedroom property next door to yours that is the brand newest most beautiful property with the highest price per night anyone's ever seen in the area with all these crazy amenities in a bowling alley and a swimming pool and a helicopter that comes with the property that you can fly the helicopter without a license and they're getting a million dollars a night that is going to skew the data much higher than your property so we use the enemy method to identify these outliers so that you can better project what your property should be able to do when you are doing your analysis how do we perform the enemy method so what you're going to want to do is zoom in to the neighborhood that you were looking at a property in where the proper your subject property we'll call it zoom into that neighborhood on the online booking platforms the online booking platforms are airbnb vrbo are the two major ones there are a number of others that you can use but we use those two to start out zoom in on that neighborhood and look at the listings around you and see if you can identify any outliers or if there's not necessarily any outliers compare your property to those properties around you and see how you fall on the spectrum of what other properties are getting is your property slightly better than the properties that are in your general vicinity is it slightly worse does it have amenities that other properties don't have does it have a pool does it not have a pool do the other properties have a pool so you're going in and looking at your neighbors or your enemies which is why we call it the enemy method and seeing how you can improve upon or where your shortcomings are in your listing compared to theirs to kind of figure out where on the data spectrum you will fall now we're going to do a quick run through of how to use the enemy method in conjunction with short-term rental data hey guys okay now we are going to put the enemy method into practice we are going to use the enemy method on one of my properties we call this one the og it is the very first short-term rental that i bought and uh so it's been it's been on the longest it has done just under 80 000 uh this year typically that's what it'll do and uh just for a reference for you guys if i were to list this property today on the market it would probably be for about 499 000. so we're going to analyze this one and we're going to use the air dna aggregate market-wide data and we're also going to use the air dna rentalizer now i do not 100 trust any one data set so it is very important that when you're looking at data you're getting it from multiple sources so not just air dna also the price labs market dashboard raboo has a good uh has good data too so you want to use a bunch of data sources uh the one data source that does not matter that is a complete variable is rental history so i'm going to use marketwide data from several sources but when doing the enemy method i like to start with the air dna rentalizer because it shows you which properties it is using to give you that projection so you can go through those and find if there are any outliers very very easily so also i like to use i've separated the aggregate data out into a nice little spreadsheet that makes it easier to read so for a two bedroom in the smokies 75th percentile which is typically what self managers will hit looking at about 63 000 a year for a two bedroom which mine is so i've already told you we're doing better than that just under 80 000 so we'll take a quick look through my listing so you can see what it looks like we have very nice professional photos it's a drone shot with bluff mountain in the back and just looking through we have updated our bathrooms and kitchens so brand new vanities in the bathrooms kitchen nothing too crazy new new countertops and refinished the cabinets also new floors and uh subway tile in the bathrooms brand new vanity here so we've done a few upgrades but other than that it's just a very run-of-the-mill exactly what you'd expect cabin in this part of the country so let's take a look at our enemies so we'll start here and let's see enemy number one that air dna is using to comp to ours is our next door neighbor okay so this person their numbers are really really low 14 000 for the year at 44 occupancy my god 44 is terrible so if you look at the average occupancy rate 75th percentile again for self managers 83 even if you drop down to the 50th percentile 50 is still really really low for an occupancy rate 69 occupancy is the 50th percentile for two bedrooms so this guy is doing significantly worse than 50 over 50 of the market so let's let's take a look at his his listing so issue number one that i see before i even click on the listing is he is only listed on vrbo big big problem there even though that is one of the biggest platforms i list on both on airbnb and vrbo and vrbo i probably only get about 15 of my bookings from there so they're missing a lot of the market for not having it on airbnb so that's one contributing factor and we're not going to be able to pinpoint exactly why these these numbers are so low but we can get a pretty good idea so let's let's take a look at his listing okay so this is a little bit of a different property than what typically performs the best in the smokies it's a it is a cabin but it's a little bit different it's very farmhousey which is fine there are people out there that want to do that but what most people come to the smokies for is to rent a cabin they want a cabin experience they want to feel like they're in the mountains so this property although it's really cute and nice feels more like a farmhouse could totally be anywhere nothing wrong with that but it's just not the typical smokies property that's sought after another issue i see here is i can't tell if these are pro photos or not and if i can't tell that they're pro photos then that's not a good thing you want to be able to tell that their pro photos like i mean this is definitely a pro photo here you know the fans on the lights look weird i think these are iphone photos personally i could be wrong so a few things going against them here let's check their reviews so jim whaley has been a member since 2019 is a premier host so that means he has done well in the past but he has zero reviews so that's a little concerning too so not really sure what's going on here but it's clear from the information that we have that their occupancy is really low they're you know they have a little bit of a different property than what typically works here photos aren't pro and they have no reviews so maybe they're only running part of the year not exactly sure what's going on here but they're definitely doing something wrong the biggest problem is that they are only listed on vrbo and not airbnb cool so let's take a look at enemy number two uh oh enemy number two is my own listing so guys this is why you want to use more than one data source and use the enemy method because had i just taken this data at face value i would not have seen this so the rentalizer is projecting that my property which is this property will do 61 000 in a year while it is over here in real time tracking that my property has already done 72 000 this year so that is a 10 000 difference on the exact same property so keep that in mind this is really good that this popped up while we're looking at it because i want you guys to see that no data set is perfect so no reason to analyze this one we've already gone through enemy number three okay this is a really good enemy because it looks like it is the exact same builder and floor plan so let's check her out okay very very similar cabin same builder looks like same floor plan so how can i out perform her well we have updated our kitchen and we've updated our floors and we also have better photos than her so let's take a look here it has her at 60 000 for the year not bad not bad at all she's on both airbnb and vrbo so that's good let's check her reviews so she has 74 reviews and a lot for 2021 that's good that's what you want to see is recent reviews looks like she just listed this i scrolled through this earlier she listed this in july of last year and she has a lot of reviews so so that's good she's doing she's doing a good job there's a few things about our property that are superior to this one just in terms of updates let's let's check her availability okay all of october is booked back to back which is totally normal in this market and she is booked most of november not a lot of bookings past december and that is good that's good you don't want to see bookings in this market really out past six weeks that means that you are underpriced so she's doing a good job pricing is optimized looks like so here's something else to look at when you're looking at at people's future bookings january and february and march these are not bookings these she has her calendar blocked because she is optimizing her pricing she's not ready to start booking then because if she starts booking this far out she will not get the optimal price so this is really good she's doing a great job so there are a few things that we can can do better than and then this property uh and it looks like she does have three beds whereas our property only has two so she can sleep a few more people but uh so this is a pretty good enemy it's pretty good enemy here and let's see enemy number four all right so this one is only listed on airbnb which is fine you'll get the majority of your bookings from airbnb in this market but 60 000 revenue not bad pretty similar to this other one and let's see how we can improve on this listing or let's check how they're doing and see if there's anything weird about this that makes it an outlier in either direction okay not pro photos photos are actually really not good at all um kitchen is not updated very so this looks like this is also the same builder as us uh not updated kitchen very dark photos furniture could use a refresh carpet so ours is slightly slightly more updated than this one as well and let's check some other things here let's check on their reviews where's the review button why is it not there okay 88 reviews all right lots of 2021 that's what you want to see recent reviews people are liking it let's check on their calendar october totally booked got some stuff in november december okay i'm happy with that calendar so this is just a slightly less nice property than ours and they're not optimizing with their photos not a problem they seem to be doing just fine without it but they could be doing better with with pro photos so also not a terrible enemy 60 000 for a property like this that needs a few updates not bad not a bad enemy either so let's take a look at no let's see number six uh oh is this the same property or just yes it is the same property so they have two separate listings for airbnb and vrbo and again vrbo has this one at 76 000 oh whoops and this one at 59 000 so again this is why you are looking at both properties so it looks like they have they don't have their listings linked maybe because here if you see on ours it's our listings are linked and it's listed both places where it's here two separate ones so again this is why you need to use multiple data sources and why you need to use the enemy method because had i not enemy method i would not see that they are comping again two properties that are the exact same property with different rental numbers so let's check out number seven oops all right this is the last one that we'll do so this is actually the highest grossing property of any of the properties that we looked at let's check them out they're only on vrbo which is a little little weird wait let's see if this is another one that no okay all right doesn't seem to be a dupe here this one has much higher rental revenue only on vrbo let's check it out okay so this is most definitely managed by a property management company a big one i can tell that because there's a property management company that does this exact frame on all the fronts of their pictures journey is also misspelled um not cool uh proofread guys proofreading is your friend check your listings to make sure they are correct okay see red awning vacation rentals that is a big national property management company misspelling stuff how many people did this have to go through to be approved sorry spelling's my thing all right so let's check them out and really dark terrible photos someone is paying these people at least 25 of their gross for this this is making me infuriated uh okay but anyway let's let's take a look at the property itself so they're not optimizing with pro photos this is cute i like the uh i like throwing in the snow photo all right so it's got typical cabin nothing fancy or nothing you know it's nothing bad okay so pretty run-of-the-mill needs pro photos badly all right let's check their reviews why can i not find them here we go reviews zero reviews all right so this is a very good example lots of times major property managers like this they will have listings on the major property i mean the major property managers on the major booking platforms like airbnb and vrbo but they don't actually want you to book there they want you to go find this listing on their actual website and book directly through them this is a good example of that and they have zero reviews probably because they're not going to respond to you if you try to book here and they will make you go find their or they'll hope that you go find their direct booking website and do that uh okay and i'm not necessarily saying that is what they're doing i can't be sure but a lot of them do do that it's it's just very weird to me that this is a giant property management company and there are zero reviews on the property all right let's check their availability these are very low rates guys very very very low rates here let's take a look at us to uh give you an idea of what we're doing for december so 183 bucks a night for december and for us well this is over christmas so let's do right before christmas oh shoot it's a six night minimum okay we are getting 655 dollars a night 655 and they are getting 183 280. so on this end so they are not optimizing their pricing whatsoever this is an outlier in the wrong direction again okay so i think i've kind of shown you a good overview of the enemy method where you can find some flaws in the data and how to find them we had two separate times that it was comping the same property to itself or comping two listings that were the same property but on different platforms and i showed you how to find outliers that are skewing the data in either direction so definitely a really good example hope you guys found some value in this and we'll catch you next time [Music] you

Channel: BiggerPockets

Views: 31,014

Keywords: how to analyze a short term rental, short term rental, short-term rental, short-term rental investment, vacation rental, short term rental analysis, short-term rental analysis, how to analyze an airbnb deal, airbnb investment, short term rentals investment, airbnb investor, vrbo, airbnb, airbnb host, airdna, real estate analysis, how to analyze a real estate deal, real estate deal analysis, rental property, cash flow, airbnb property, invest, cash, biggerpockets

Id: Noa_OLEKGQ4

Length: 21min 3sec (1263 seconds)

Published: Mon Nov 01 2021