Airbnbs are an awesome thing. They are perfect for people who don’t want to spend a fortune on a hotel or just want something cozier.
They’re also a great way for owners to make a ton of passive income.
But can you do an Airbnb on a subject to deal?
Heck yeah, you can!
Let me walk you through a deal I did that cash flows $3,000 a month on a property that I bought with none of my own money or any credentials.
How to Create a Subject To Exit Strategy Using an Airbnb
Guys, I actually do a fair amount of deals that end up becoming Airbnbs, which I end up doing through creative financing.
I got a deal here in Phoenix that was worth $500K in value and – here’s the really cool part – I paid the full retail asking price.
And now I hear you asking – “Pace! What? You paid the full retail price??”
Yes, I did and I’ll tell you why.
I don’t buy properties based on the value of the house; what I do look for is the yield or net return on my money.
And when I do that, I want to do it without using any credentials and with low interest rates.
For this deal, my wholesaler Katie told me about a house whose owner was having some health issues and she didn’t want to leave the home to her son.
Instead, she wanted to sell the home using seller finance so that her son could receive monthly payments.
Let’s look at the number breakdown:
June wanted to be paid $1700 a month. With property insurance and interest, that bumps it up to $2000 a month
June also wanted a $10,000 down payment
I paid Katie an assignment fee of $5,000
I put in $20,000 for renovations & another $20,000 to furnish the place to make it into an Airbnb
There were also maintenance fees, such as utilities, landscape, etc.
At the end, the total price to get this property to cash flow was about $70,000.
Before we go on, see what I did there?
A lot of people only look at the down payment and the month to month cost to the seller and would maybe only see about $12,000 for them to pay.
Everything I just listed is the actual entry fee. And something you should always calculate when doing creative financing, whether it’s seller finance or subject to.
Now, back to this deal.
I did all of this without any money coming from out of my pocket.
Easy – I have a great network of private lenders that I go to, who lend me cash at low interest rates.
But because of that, I now need to add another $500-600 to my monthly payments, so we’re now at $2700 a month.
At the end of the day, once I had it all fixed up, this property brings in about $8K a month as an Airbnb.
AND because I don’t really want to manage this or deal with listings, I pay a manager about 10% to take care of the property.
So at the end of the day, with all the expenses, taxes, and a little saved for a rainy day, I receive $3000 every month!