How to Find Cash-Flowing Airbnb’s

On this webinar, our CEO Miguel Alexander Centeno sat down with John Bianchi, Founder of STR Search, an Airbnb data firm, to discuss critical topics for setting up and finding the best Airbnb. They were joined by Jacob Burris, Executive Account at SET as well as Taylor Jones, Head of Acquisitions at STR Search, to discuss investment selection and tax implications for short term rentals (“STR”s). 

Together they tackled operations and finance topics, spanning: the importance of careful evaluation and analysis before making a decision as well as the potential for depreciation and cost segregation to reduce tax liabilities.

We’ve selected the fan favorite questions from the joint webinar, which are provided below. To watch the full episode, check out and subscribe to our YouTube channel here.

Q&A Session

Miguel Alexander: How many markets should someone find when they’re starting to search? How many markets should they compare? 

John Bianchi: It’s gonna depend on everyone’s situation. Some people need a little bit more information to actually feel comfortable with it, but a lot of people have preferences. And so it’s okay to have preferences, I think is like one of the main things I want to get across here. If you want to be in a beach market, go to a beach market. There’s a lot of them across the United States. A lot of them work. You just got to study them so with that being said, how many markets should someone find? 

One, you should find one market and you should know it like the back of your hand and know everything about it, but you’ve got to be able to go through quite a few other markets until you find the one that is best for you. And so, you’re probably going to look at you know, 10 to 20 different markets and narrow it down. And eventually you’re gonna realize that one of those markets is better than all the other ones. 

If you’re a psycho like me, you’re gonna go through 300 or somarkets, potentially even more until you narrow it down to a handful. But not everybody needs to do that.

Miguel Alexander: What is your process to narrow down if someone comes to you who is brand new to the space and deciding between 10 different markets, and how do you help brand new operators and evaluate how far in they are in the journey and what they should do next?

John Bianchi: First thing is always regulations. So if you’re looking at that many markets, there’s probably a handful of them, you could get rid of just simply based on the regulations, then you’re probably looking at the amount that you can actually afford within those markets. So trying to find what markets are gonna give you like the best bang for your buck is going to be a good way to sort of organize those from which one’s best or worse. 

The next thing is going to be the price to rent ratio, which we’re going to get into quite a bit but just the idea of understanding if you buy a home for 500,000 It should make roughly $100,000 a year. I personally when I find a market that has good regulation, and good inventory, so the homes aren’t 200 years old. It’s got good inventory. 

The next thing I care about is what is the price to rent ratio and how close are those two, ideally 20% is where I like to be but 15% works and 30% is the best case scenario. So more revenue, lower purchase price, obviously is the best way to cash flow. 

Jacob Burris: What is a Buy Box and then what is the process of building one?

John Bianchi: Let’s say you are evaluating the Scottsdale, Arizona or the Phoenix, Arizona area, you’re not going to buy everywhere in that area. There’s going to be one spot specifically that’s going to be best for short term rentals. 

There’s a certain box in that market that you’re going to want to hyper focus on. It never works out to be a perfect box. Within that you have all of the criteria in the world to understand what is the absolute best thing to buy within that specific area of a market. 

So for example, in one of our markets, we have we look for properties that have four bedrooms,  high ceilings in the living rooms, two living rooms, enough room to add a fifth bedroom, a flat backyard, a deck that’s a decent size, there needs to be enough seating for at least 10 people within the dining room, the game room has to be large enough to fit a pool table and it needs to have a bit of a log cabin, one that looks outside and does not have too many windows. If we can have all those requirements, and it’s $400 to $500,000, We’ll actually purchase that property because we know it’s going to be our best case scenario. 

So that’s one example of a buy box that is hyper focused within one market that we have, and that’s in one specific HOA out of about 60 in that area. So what does that mean? When we find a property that meets all those criteria, it’s purchased within seconds.

Miguel Alexander: Is the Buy Box geographical? Or is it like once you have the geography, it’s meeting certain criteria and finding a geography within certain requirements. 

John Bianchi: It’s both, it’s gonna be a specific part of that market. And then it’s also going to be all the information of what’s the best thing to buy within that market. And it’s all the inefficiencies and little things that drive more revenue and give you a more of a competitive advantage. And those are all the little things that you’re looking for. And you want to stack them so you want to stack as many as you can get and that’s what’s gonna give you that edge in that market for a lower purchase price. You learn how to build a Buy Box by studying your competition, and then eventually you understand the definition of your buy box for your market to know exactly what’s the best thing to purchase.

‘‘Prioritize markets with good regulations, inventory, and price to rent ratio for optimal cash flow.’’

Miguel Alexander: What’s the most common mistake people make when it says underwriting a deal?

Taylor Jones: A lot of the mistakes come from the emotional side, especially when it comes to design. People design it based on what they like or what’s let’s be honest with their spouse and not what is the ideal booking clients or IBC’s. So if it is young families, if it is younger couples, if it is bachelorette, you don’t want to design it for you, you know even though you own the asset you do need to treat it like it’s for you, that’s a big common mistake. 

Another common one is over engineering kitchens and bathrooms. You are not living there. It does not matter. You know that the kitchens of Bath are not up to your standard outside of luxury which is its own little skew which which we don’t typically operate in its very Boomer boss it has its own ways to play the game. But if you look at everything else outside of luxury kitchens and baths do not matter. Does it need to be clean? Yes. But we have properties that our clients have bought. I’ll just tell you with formica countertops driving a quarter million in revenue. So when I tell you the kitchen doesn’t matter, you can have formica countertops in Drive 250,000 in revenue, so over engineering kitchens and baths is a huge common mistake.

A seven to $10,000 bathroom remodel should have been spent on seven to $10,000 worth of amenities, game room upgrades, things like that, that are going to provide that because again, if we step outside of luxury, we’re sure we’re competing on the visual aesthetic, per se of the property. Everything else we’re competing on is how much value am I bringing to the customer, which simply put is how many things are there from a hospitality perspective, which are amenities? So those are the big common mistakes that we see, you know, from just setting up properties like that.

John Bianchi: I would say the bigger mistake that I personally see is a step before that. Which is why they buy the wrong. They buy a property that they overpay for a property in the wrong area that doesn’t have enough competitive advantages, or revenue drivers to ever hit the revenue target that they wanted to hit. So no matter how well they redesigned it, it’s never going to cash flow in the first place. Right. 

You could throw as much money as you want to it’s not going to cash flow either overpaid, it’s in the wrong area. There’s not enough demand, whatever it is, you’re dead in the water right from the get go. We always say that. Schools are great. Yeah, resale value is perfect. So when the property salt makes sounds making your money and you just put $50,000 into furniture, you’re gonna lose all that you’ll be able to resell it or you’re gonna lose the $50,000 virtually just put into it right. We always say that. Every property can be pretty but not every property can have cash flow. So that’s the first step there.

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Miguel Alexander:  How do you think of market premiums and like to see the other side of that coin like the outcome side of sweeper areas? 

John Bianchi: That’s what I call the inefficiencies within a market. So as an example, we’re in one market where most of the properties or purchases are doing around 200,000 and the other people in the market that are also making 200,000, their homes cost twice as much. And so it’s just understanding what the leverage points are to buy the lowest priced property to get the highest possible revenue and like what you’re saying is this sort of it like how do I explain this better? I love those things. 

Those are my favorite things to look for when I got my properties in Chicago. One was directly beside the train. So if you’re to look out the window, the train went by the rent was $1,000 cheaper because of that, and then I got another home that was directly across from a section out section eight housing, which lowered the cost of the rent for that home but it was in the perfect spot with rooftop patio and the rent was $1,500 cheaper for that home in comparison to the one like four blocks over. And so those are my favorite things to look for because it’s an automatic like built in when for the property and the guests don’t care because they’re only there for three days. And they don’t notice any difference, right? It’s only when you live there that you start to realize like hey, actually, it’s a lot better for blocks over right. And they’re not there all the time. Anyways, those are my favorite things in the world. I call them inefficiencies. 

About the Author(s)

Miguel Alexander transitioned from the Big Four to pursue entrepreneurship, focusing on providing innovative solutions to smaller, equally passionate businesses. Licensed to represent taxpayers before the IRS and the U.S. Tax Court, he’s a recognized expert quoted in publications like the Wall Street Journal, Fox Business, and MSNBC. Miguel has testified before Congress on tax reform for the Sharing Economy and actively blogs on tax, financial, and economic matters. Beyond taxes, he coaches his children’s soccer teams and relishes extended camping and ski trips. Ask him about his favorite BBQ spots in Austin, Texas and he’ll be sure to share a few. 

John Bianchi, Founder of STR Search has successfully directed over $70M+ investments into strong cash flowing Airbnbs across the country. As a master of deciphering complex datasets, John has a 100% success rate, across 150 + properties, for helping his clients acquire cash flowing Airbnbs. When he’s not poring over data, he’s usually having drinks on the boat or snowboarding the mountains, depending on the weather.

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