When we are young, we just do things because we see other people do them, and we accept that these things are correct and work.
As we get older, we learn this is not always the case and that we need to conduct research and come to our conclusions to determine what path we should choose.
Sometimes choosing the right path can be very difficult, especially in the Short Term Rental business. Most seem to be going after the easy money with rental arbitrage and revshare. There is nothing wrong with these two models, but I choose to play the long game and go down a different path to building wealth by investing in APPRECIATING ASSETS that will grow along with my cash flow.
Investing in appreciating assets is not new. In fact, it is one of the oldest and most prudent investments known to humanity. It has stood the test of time and continues to yield results even in today’s economic climate, but…
to be successful investing in appreciating assets, you still need to have a Clear Vision of:
Where you want to go and When you have to get there.
Here is what I mean. Answer these 5 Questions (write the answers down on paper), and you will immediately start to see some clarity.
- Why are you in or getting into Short Term Rentals?
- Are you doing STR for short-term cash or long-term wealth?
- When do you plan to retire? (be very specific with exact dates)
- How much liquidity will you need on the date you retire?
- How much STR debt can you service when you retire, especially if we go through another Covid’esque pandemic?
Let’s break these questions down.
- When answering this question, I want you to think about how it ties to your family, your retirement, your immediate need for cash flow, etc. In my case, I got started in Short Term Rentals after losing a lot of money in the stock market in 2009 when one of my golf buddies got busted for running a Ponzi Scheme, and I had over $1M invested with him—gone instantly. So, I decided to never invest in the stock market and start investing in real estate. In 2013 I saw short term ramping up and switched from LTR to STR to build my real estate portfolio faster through higher cash flow to hit my retirement financial goals and timing.
- Short -term would be under 12-24 months and most based on turning quick cash through renting a room at your primary home, leasing an apartment and turning it into an STR, or even co-hosting. None of these are investments into long-term wealth-building because they do not appreciate.
- As I have coached and mentored thousands of entrepreneurs over the years, I have found that those who cannot “Keep Score” and actually measure progress to the ultimate goal typically fail or have a significantly lower success rate. This is why you need to be specific when you plan to retire, exactly how much money you need, and have a financial plan to worm towards every day until you get there. This is the long game.
- Once again, be specific. I will share mine. $15,000,000 in liquidity. No more than $1,000,000 in real estate debt. I have to hit both of these goals before turning 65.
- I am currently 47 and have $1,470,000 in real estate (STR) debt on a $4,000,000 portfolio that generates between $600,000 to $700,000 in annual rental income. I will continue to invest and have to follow the financial plan to lower my overall debt over the next 12.5 years.
As a young entrepreneur, I didn’t have this type of vision. Sure, I had some big wins as I grew some large companies, but I look back and wish I would have this type of a clear vision 20 years ago.
I really hope you will go through this short exercise.
And look. If you’re not sure or get stuck, just hit the reply button or join my Private Facebook Group Build Short Term Rental Wealth. I am more than happy to help you invest wisely in your future.
