B (2:08)

Jimmy, you know, obviously you see a lot of data in your role at Air DNA, but for our listeners who don't live in the Airbnb data every day, what are the maybe top two to three numbers that tell you how the STR market, just like nationally, is actually performing right Now, Yeah.

D (2:25)

I'm going to give you three occupancy numbers. So the first is average occupancy today past 12 months is 55%. The other is occupancy at its peak in 2021 was 61%, and then occupancy for 2019 was 54%. And I feel like it tells this story that we've seen over the past five or six years where occupancy is well down from its highs of 2021, but we're still well above what we're seeing in 2018 and 2019 when we're seeing massive growth in this sector. So, yes, we went through a surge of investment in 2021 and 2022 when things were amazing and. But things still look really good compared to the last 10 years. And I think if you're underwriting properties and new investments, realistically, you're going to be able to find great deals.

A (3:25)

Okay, so we're on the track that Airbnb is, are still worth it and can be profitable. But what about finding the right Airbnb? So pretend I'm a brand new Airbnb investor and I'm going to take the very first step. I have to choose a city to invest in. John, what is the approach you are taking right now in 2025 to find a city to invest in?

C (3:45)

Okay, I'm going to try and give a not too complicated answer, but there are layers to this because there just has to be. Right? So first thing you need is an Air DNA account because you can't figure out if a market is profitable without one, naturally. But you want to find a place that you actually enjoy. So I've, I've looked into at this point like 500 plus different markets. I found mountain markets, desert markets, beach markets. I found all these different types of markets that work. So what do you, like, start with that? Because if you actually truly love the. You're going to put a little more TLC into the property and it's going to perform better, in my opinion. So start there. Then make sure to look into the regulations. That's before you look at data, look at regulations. Right. And ensure that you can actually legally operate. And then third, what is your budget? How much capital do you have? If you have, you know, $100,000 to go and buy a property, you're not going to be buying in downtown Scottsdale, it's just not going to work out. Right? So find a place that, with the amount of capital that you have, you can actually be very competitive within that Market, which means if you have a limited mark, a limited budget, you may need to go into a market where there's not steep competition, maybe a less known type of place where there is aren't extreme resorts in the backyard. And so just by following those few steps that I just mentioned, you're going to eliminate thousands of potential areas that you can look into. Now at that point, that's where you're pulling up air DNA and you're then going to open it up and you do this one thing called the 20% rule, which I can break down a little bit further, but it's a way of looking into a market from a 10,000 foot view. Okay. And so when I look into a market, I want to be able to quickly figure out if there's any cash flow potential in that market or not. And I use something called, once again, the 20% rule, which is not 20% cash on cash. It is the purchase price compared to the annual revenue. So if I'm buying a $500,000 property, I want to see that it can make $100,000 a year. The $100,000 is 20% of the purchase price, which is why it's the 20% rule. Right. And so what I will do is I will go into, you know, any city and then I'll, I'll use the filters on air DNA to lower the amount of properties that I'm looking at. So I'm looking at a very like similar type of property set, right? So let's say four bedrooms with one specific area that all have pools. And I'm going to look and try and understand how much those properties are generally making, right. Set up in a way that I know I can set up a property. I'm going to go, okay, that's, these properties are roughly making $100,000 a year. Now that I have that annual revenue number from a high level. I will then hop over to Zillow and take a look to see if the four bedrooms in that same area with pools are selling for 500,000. And if I can see that very quickly and like this whole process can take you 15 minutes, right? If I can see that, then I know within that market there's cash flow potential. And it's a market that is worth deep diving right now. The vast majority of the times. And again, I've looked at like 500 plus markets the vast majority of the times you'll see that the, you know, the properties are making 100,000. Then you go to look for the ones that are for Sale, and they're for sale for 800, 900 or a million dollars. And you're like, okay, well there's. They're not meeting the 20% rule or not even close. Therefore, there's most likely no cash flow within this market. Therefore it's not worth deep diving and trying to find a property in this market. And at that point you just remove that market from a market that you're willing to actually deep dive. And so but if you do find one where it does meet the 20% rule, add that to your short list and that's a market that you want to deep dive and try and find a profitable property in, because that's where they exist. And likely the deeper you go in, the more you can find better, even better properties in that market. So, yeah, I know it's complicated, but I can go layers deeper if you want. Sorry, Tony, go ahead.

B (7:18)

No, I mean, dude, I think that was a great starting point. And your process, I think, mirrors and echoes a lot of what I believe as well is that choosing a market is really a process of elimination. With 20,000 cities that exist, you know, 20,000 plus cities in the United States, it's not like you can just start, you know, there's no like Goldilocks City. That's like the best city for you. It's really just trying to eliminate as many cities as you can that do not fit and then seeing what's left over and trying to decide from there. Because the idea that I would love a, you know, five bedroom, you know, villa on the beach in Maui, like, who wouldn't want that, right? Like, of course that's gonna. But can I afford to actually purchase one of those? Is a different question. Can I buy it and it actually be profitable? Is a different question. So it really is like chiseling away at all the things that don't. That don't make sense there. Jimmy, what about for you? Right, because you're. Again, you see a lot of data in your job through air DNA. How does your approach differ, if at all from what John laid out?

D (8:17)

It's funny, every time I hear John talk, then I just try to take what he says and make it easier to do within the air DNA system. So he's been doing. He sort of described this a few times for me. So now within the air DNA tool, like we bring in every single for sale home within the country, we're then running a rentalizer. So that's our property earning estimate calculator. So going in and finding nearby comps, what are they earning showing what it is, putting that sort of 20% rule, that calculation on the sort of for sale card. So what do we think that property could earn? What is that? As a percent of the for sale price and then allowing you to sort by that gross yield figure. And so you can click into any market around the world or in the U.S. look at the properties with the highest gross yield in that market. Maybe filter to just three or four bedroom homes, Homes greater than like that are in your sort of buy box 3 to 600k or whatever that number is. I get a sense of okay, are there any properties that are currently for sale today that sort of meet that threshold? Are there a lot, are there? Just a few. And then I'm sure we'll talk through that sort of next leather layer of digging into how much you actually think that that property could earn. But this, that's a great sort of filter of once you get a sense of. And when I started my search I was like I want to look at markets in a four hour radius from where I live. That filters it down to what, 10 markets. And then it's not too hard to go through this 10 markets to get a sense of okay, which areas look like they could have some investment potential.

B (10:04)

Jimmy, I think the one thing I'd add because I love the fact that you can see for sale properties inside of Air DNA but I think the challenge is that sometimes there, there's not enough supply currently for sale in that market. So what I'll do sometimes is I'll go and I'll look at recently sold properties in that market and do that same analysis. So since we're, since we're taking, you know, suggestions here and if we can get previously sold properties inside of air DNA as well, I think it'll really allow us to do that full analysis within that tool and not have to go to the Zillows or Redfins and kind of piece it all together.

D (10:39)

Not to give too much, but we're building something where it looks at every previously sold home and matching it up with those that are actually running as a short term rental and what their revenue is. So we could get like historical gross yield like index for that market and where it's trending. So absolutely like looking at historicals is so helpful for getting understanding of one, what are investors willing to pay today? Like are they going after properties that are sort of trending on the yield of like 10%, 15%? Is it back during COVID where it was like John sort of was saying 30% that then now he's saying 20%. Maybe next year he'll be saying 15%'s okay. But yeah, it's, I love looking at the historical data too.

A (11:33)

Well, Tony and I have a great debate going. He invests in larger markets that for short term rentals. And I'm in very rural areas with my short term rentals. So what is the, you know, where are you going to see the profit coming into 2026? What are going to be the better markets, the larger markets or the small rural areas?

D (11:52)

I'll report on what we see people doing and it's absolutely going after the smaller markets. We've seen growth right now year over year. Change in supply is about 10% for the smaller markets, it's about 3 or 4% year over year growth in some of the larger markets. So clearly people are finding opportunities in those smaller markets. When we look at the data, a lot of those smaller markets have seen much lower levels of home appreciation. So there's still deals to be found. And it's not like you go into the major cities where and people have really driven up home values. It's not like where you go into a lot of the major mountain or coastal areas where people were looking for second homes during COVID and really drove up the values. Like in a lot of these rural markets, there's still great home value to be found and the demand still growing. Like we still see more people choosing to stay in rural areas than ever before. And it's still the fastest growing in terms of demand growth as well.

B (12:59)

Jimmy, two quick follow ups to that one. I agree with you. I think that there's a tremendous opportunity in some of these smaller up and coming markets because a we, we haven't seen the crazy increase in prices where, you know, you know, Smoky Mountain's price have like doubled since COVID Right. And I think there's also less competition in terms of you're not competing with the guys and girls who are doing this full time and have built up these massive portfolios. They know all the ins and outs. So there's obviously a lot of opportunity there. But I think two questions I have for you. Number one, how do you define between a, a large market and a small market? Like what, what are you looking at to make that determination? And then second, are you at all concerned in these smaller markets about even if the balance between supply and demand is healthy today, are you at all concerned that maybe a year from now or two years from now that if this supply growth continues that there might end up being an imbalance in a couple of, you know, years down the road.

D (13:53)

So I'll, I'll start with how I define the market. So at Airdna, we break up the country into 317 different markets. About 275 of those markets are sort of defined name areas like think like Gatlinburg, Pigeon Forge, Cape Cod and then there's about 45 of those areas that are and we sort of define as state areas. So it'll be like Georgia area or Mississippi area. And that will sort of encompass all the small markets. They're still sort of name defined submarkets, but it'll be smaller lake areas, there'll be more rural areas there. You can dive into all the submarkets. But it's sort of outside of these sort of large vacation rental center markets. So I'm some of my favorites that we sort of defined. I think for the first time for the industry. It's like that you can go in and look at the Adirondacks, you can go and look at Coachella Valley, you can go and see how the Lake Tahoe market, like these are some huge vacation rental markets that have been around for hundreds of years where people have been sort of vacationing that vacation homes are the primary type of lodging in those areas. There's not a ton of hotels in a lot of these areas. So I love knowing that the local economy is sort of, it's really dependent on vacation rentals being there. You're not likely to see regulation that's going to come in and see vacation rentals be banned because then people wouldn't have anywhere to stay and the local economies would sort of collapse. But there are so many emerging sort of new vacation markets around the country that could be the next like Adirondacks or Coachella Valley or where if you get in early and 10, 20 years down the road, you might see your home value in 2, 3 or even 5x. Like when you look at those compared to some of the bigger markets today.

B (15:58)

And what about the supply versus demand piece, Jamie? Like how do we make sure? Because maybe it's a healthy balance today. But then everyone sees like man, this, you know, this small market, you know, like say where Ashley has her lake house, everyone's like, man, Ashley's lake house is crushing it. I want to go build a lake house right next door to Ashley. How do we protect ourselves against oversupply coming in the future? Or what should we be looking at to know if it's coming? Maybe is a better question.

D (16:21)

Yeah, and that is a big concern with going into some of these smaller markets. If there's only 40 or 50 listings that are there and you get 10 more that come in in the next year, like that increases supply 20% overnight. Right. And that if there's not enough demand coming into that market, then that could significantly impact your ability to generate the turns that returns that you were expecting when you invested in that market. So you, you definitely have to think about how many homes are there that could turn into future competition. A market I was looking at and it was this neighborhood that had like 200 homes in it and about 75 of them were existing short term rentals. And it just felt like all too quickly all of those homes could be competition. All the homes look pretty similar. And then, and you could see yourself and having to monetize outspin to attract people to your properties. If you're the best home in that market and maybe you're, you're able to weather that. But if you're sort of an average home in that market, I'd be really worried about the future supply that could come in.

A (17:36)

Now John, what are you seeing compared from the larger markets that are traditionally well known for short term rentals compared to these smaller rural areas?

C (17:45)

So I work with a ton of different clients, ton of different people that have a ton of different things that they want. Right. What I am noticing is that there's still opportunity in the larger markets and then there, there is opportunity in the smaller markets, but I'm afraid of going too small. So like what Jamie was just saying there, if you had, you know, 40 listings within one market and they add 10 more, then all of a sudden that market is oversaturated, like literally within six months if people find out about it.

B (18:10)

Right.

C (18:11)

But I see opportunity in both. It's just a matter of what is your objective and what is your goal. Right. So when it comes to these larger sort of class A markets is what I like to call them, right? Your Gatlinburgs, your Scottsdales, things along those lines. A lot of people tend to go to those markets because of appreciation or because of tax savings. So in Gatlinburg right now we have people that are coming to us because they can just buy these existing Airbnbs that are already furnished and have a track record of like being profitable and they're taking them over now. They're not cash flowing kings. You're in cows, they're, they're barely breaking even. But you're, you're putting 10% down on the property with a second home loan. And you know, you're buying a million dollar property for like $100,000. And then your tax savings on that, depending on your tax bracket, can almost cover all of that. And so you can almost get all of your money back, like on day one, just by not having to pay the government your tax savings. And so we see a lot of people being interested in these types of very established markets simply for the tax play. But then if you're wanting to go more and more on the cash flow, you have to go more and more into the areas where you do have the cheaper homes, but you still have good demand. Right. And those are going to naturally become those smaller markets. But I do think there is a threshold of being too small and then you can kind of ruin yourself. So when I do look into smaller markets, I like for the market to have not be the main destination. Okay. So like upstate New York is an example of this, where there's a ton of these really, really small markets, but people are going from New York to anywhere in upstate New York. So it's technically this massive market that's spread across, you know, a hundred small towns. I mean, Jamie, your property is a similar example of that as well. Right. It's, it's not like the one, they're not going to one specific spot, but it's in this general area. And so I think there's opportunity in both, without a doubt. It's just a matter of what is your strategy and what are you trying to optimize for cash flow appreciation or tax savings? And then you want to, and what kind of protection do you want long term with your property? Do you want to, do you want something where, you know, 10 more properties can show up and you're kind of like you're screwed? Because I've heard of people in markets in Maine where that's happened. Right. And so it's scary to think about that. Like, I don't want to be in that situation and I want to put a client in that situation. So it's a matter of just knowing what you're trying to optimize for and then finding the market that allows you to optimize for that.

B (20:31)

Jamie, what would you say is the biggest mistake that Airbnb investors make when they look at the macro data for the short term rental industry?

D (20:38)

Yeah, and it's, it's almost inherent in the definition of macro. Like it is the market average. Like, no one actually operates at market average. And like, one of my best examples is looking at sort of review scores. So the average Airbnb listing has a 4.8 review score. The average individual host has a 4.9. And the average like full time host that's like I'm doing well has like a 4.95 like and then you look at the difference in earnings, the average and going from a 4.8 to a 5. 0 increases your RevPAR earnings by about 14%. So like going into a market and looking at the percentiles of like what is 50 percentile, that's average what's earning in the market? That's what we're going to show on the main page. But then going and see, okay, what is what are the earnings at the top 75%. What are their earnings at the top 90% of what people are doing that are really going in and operating well. They're getting the top review scores, they're amenitizing in a way that and guests really love the property might give you a much better sense of what a strong strongly run property could earn. And then likewise, I, I'm sure we'll get into it, but if you're not going to be running or if you're hiring a property manager that's running at a 4.7, you might want to lower your expectation if you, if you think your property might actually run at the average.

A (22:14)

Jamie, what data signals should rookies track that often predict the market softening when they're looking at this data?

D (22:20)

Yeah, so that's where I do see some indicators at the macro level that are really instructive. So I always like to start at like where is and supply growth in the market, like how are more listings coming in? Is supply growing? Is it flat versus last year? Is it declining? Like are investors actually leaving that market? Are they coming in? Is it growing 10, 15%? Like what is it relative to national average? And then looking at changes in occupancy, like is this a market where occupancies are softening relative to last year or the year before? Is this a market where ADRs are increasing? It could absolutely be a prediction of market softening if supply is growing and occupancy and ADRs are decreasing. That's essentially the definition of saturation and something that you should be worried about when looking at a market today. I'd say right now most markets are not seeing that. In most markets we see occupancies are either flat or slightly increasing. So there are lots of great signals there on which markets have momentum and those are great sort of high level filters to look at when evaluating the market.

A (23:41)

So the macro data gives us direction, but it doesn't always predict how your Airbnb will perform. After this break, we'll zoom in to the property level where the real money is made or lost. We'll be right back.

E (23:53)

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A (26:13)

All right, so we've talked about what's happening across the market. Now let's bring it down to the property level. John, what are the top mistakes that rookies are making when they are analyzing an Airbnb for purchase?

C (26:26)

They are overestimating what their property can actually do. So they're taking a look at the property and they are assuming that they are going to perform at the top of the market, even if their property doesn't have the things that it needs to be at the top. And one of my favorite examples of this is that somebody showed me their property and then they showed me the property that they compared themselves to. And the property they compared themselves to had a giant backyard with a whole bunch of amenities. Their property, the backyard went down like off a hill, like right away. So there was no room in the backyard to add anything. And they're like, yeah, we were comparing to that. We were trying to, like, you know, perform as well as them. And I'm like, well, how? You know what I mean? Like, they're selling 10 more things in their backyard when somebody rents out the property where you can't do any of those things, right? And so then therefore, there's no way that's not apples to apples comparison, right? And so then therefore, your property always has to be cheaper because you're selling less things in comparison, therefore you can never make as much as them. And so I think if everyone, you know, if you're newer to this and you're trying to get this started, you're trying to figure out, like, how much do I think this Airbnb is going to make? Being more conservative will save you in the long run. Look at that property that you want to consider to be comparable to you and say, okay, if it's making $100,000, what if I made 80? What if I made 75? Could I live with this worst case scenario? And if so, then everything else is a cherry on top, right? If you're not losing sleep at night, that's sort of the best way of going about it. So make sure that when you're analyzing a property, it is truly comparable and it's not like, significantly better. And then be more conservative with your estimates. And those two things alone will help you avoid buying A bad deal.

A (27:57)

One thing that I always like to do when I'm looking at comparables is look at the reviews and what are the items that people are like calling out in the reviews, because those are probably like the amenities or the things that's actually like, driving that revenue up that everybody is appreciating. So I always try and like, look at that to see what the expectations are, what people want in a, in a rental.

C (28:19)

You can take it one step further with copying every single review, throwing it in ChatGPT and asking it that question saying, why are people booking this place? And it'll just spit out the answers for you.

B (28:27)

Not to get too technical, but you can take it even further. And John, you probably know this, but, like, have you have used Applify before? And I'm going to get like, real nerdy here, but Applify is like this scraping tool and they've got an Airbnb review scraper where you can just drop in a bunch of different Airbnb links and to, like, different listings and it'll pull all of the reviews for you and you get this massive, like, Excel file so that, you know, that's me and John probably just being like, more nerdy than the normal person.

A (28:53)

And then here's me with my pad of paper and my pen.

D (28:57)

And then here's me with you guys predicting our product lineup. We've got coming to our property pages within Air DNA, the Airbnb review summary that's going to tell you what guests like.

B (29:07)

Jamie, I'm so glad you're on this podcast.

C (29:11)

We got one more. We use Appify to check to see if there's been one to three reviews every single month for the past 12 months with a listing. And if we can. So we will pull the data, we'll clean, we'll. We'll extra clean it. If you throw that into Air DNA, that would just be lightning in a bottle.

B (29:27)

Cherry on top. There you go. This has turned into like the, we're just trying to add things to the Air DNA roadmap right now. But let me, let me, let me ask you guys this next question about analyzing deals, because obviously things have changed since post Covid. So how has your approach to analyzing airbnbs changed from the, you know, the gold rush to today? And Jamie, we'll start with you.

D (29:50)

And one thing that changed, and it was, it was tough to talk with people about it and during the COVID area because our app didn't do a good job of highlighting it, was that the past 12 months wasn't always predictive of the next few years. And that's where like, because occupancy levels were at record highs, like taking a realistic, like, yes, it says your property is going to generate and 70% occupancy over the next 12 months. Like, you might want to get a sense of, like, okay, how much are occupancies up relative to 2019 to then predict how much they might be coming down over the next few years? Because we knew that those levels were not going to maintain that high, that they were going to be coming down. And now sort of juxtapose that to what we're seeing today. Like, I do believe that now, like the next 12 months for most markets are pretty predictive of the next five years. So I'm much more comfortable today taking and trailing twelve month performance and using that to project forward. But that is something to look at a market, look at its historical performance. And are things relatively stable today? Are they significant? Higher or lower than near term history is a great sort of check of whether or not I could use these projections for the next few years as I'm sort of underwriting that investment.

B (31:25)

And then, John, same question for you. How has your approach changed?

C (31:28)

Yeah, I think the, the Gold rush era was one of the worst things ever happened to Airbnbs. The amount of people that like jumped in and jumped on the hype of a market when it was performing well is left a really bad taste in the mouth for a lot of people. Right. But the, the, the approach that I have taken has changed significantly where I've become extremely conservative because I was operating about 15 Airbnbs in the middle of a city right when Covid hit and all of those bookings disappeared overnight. So that business was just essentially like wiped out with the lockdowns. And so whenever I'm, you know, analyzing properties, thinking about properties, I'm always trying to think of worst case scenario, how do we deal with this? So I'm, I'm very conservative, but I'm also trying to find a lot of different ways that I can add things to my property that is going to allow it to be way ahead of the competition. And so I take this approach where I'm trying to create a property that if we do hit or, sorry, when we do hit a recession and the stock market drops by 20, 30% and people are scared to travel and all that kind of stuff, that my property or the properties I help people with still have the ability to get booked. And so the strategy is very, very, very conservative in Other words, the logic is, if my Property has like 10 different things to it, all these amenities, it's really fun. It's one of the best properties in the market. That's what I want. Because when the recession does happen, all I have to do is lower my prices to the same prices as the, you know, not so exciting Airbnbs and mine will definitely get booked over theirs. Because when a recession does happen, it doesn't hit everybody equally. Right? Certain sectors get hit, but people still travel. It's just less people. And so I want to have one of the Airbnbs that can still get booked during that time frame. Even though I'm not going to make that record high money, I'm going to be able to still at least acquire some bookings. That's the strategy that I have been using since for the past four years when I'm helping anybody determine which properties get set up. It's like, let's build in these protections so that when this time does come, we have those already in place. And that's how I've really changed since COVID I feel like somebody who went through, like, the 1920s when everything, you know, went terrible, and now I'm going to just be conservative for the rest of my life. And I'm okay with that.

A (33:40)

I feel like the same thing happened in, like, large multifamily, where people went in, you could make tons of money, and then now people are getting burned. But I think in the short term rental industry and also multifamily, the people that are surviving and really coming out of it are the operators, the people that really put in the time to build their operations, to give those unique experiences, to go above and beyond, have their systems and processes in place, know what asset management is, and actually do asset management and bought off of, you know, being conservative or how they're going to operate and not just banking on, you know, this gold rush and banking on the appreciation that was like crazy happening over those couple years. But I think that's like a big difference too, is like really understanding how to operate or hiring the right co host or property management company to operate your property too. Now, John, is it possible for an Airbnb property to perform well even if the market that it is in is underperforming?

C (34:41)

It is. And I typically never like to talk about the markets that we help our clients purchase in just because I don't want to give away those markets, make it harder for them to, you know, hit their numbers.

A (34:51)

Oh, you're gatekeeping on us.

C (34:52)

I am 100% gatekeeping. You have helped invest too much money into these markets to hurt those people. But with that being said, there's one market that's so complicated and requires so much capital that I feel okay talking about it, and that's the Scottsdale Phoenix market. So there. I mean, Phoenix made the headlines for the Airbnb bust, right? Every, like, after the super bowl went through there, everybody was talking about how all these properties are not performing, all these properties are not booked out, blah, blah, blah, blah, blah. And meanwhile, we had, you know, like, 20 plus properties in that area that were all, like, record highs. And so what I sort of learned through that process is, and Jamie kind of touched on this a little bit, is saturation is not as straightforward as, you know, what is the. It's not as straightforward as I thought it was. Okay? It's really, really, really niched down. So, as an example, in Miami, there are 18,000 or 20,000 Airbnb somewhere around that number, but 10,000 of them are one bedrooms. And so if you were to ask me, hey, is Miami saturated? I would say, well, are you trying to cater to couples or are you trying to ca two groups of 16 people? Because that vastly changes it. Then the next question then becomes, well, are you trying to cater to groups of guys or groups of girls? Because there's a lot of bachelor pads, but there's not a lot of bachelorette pads. And then the next question is like, well, are you going for, like, luxury bachelorette groups or are you going for, like, just, like, regular whatever type of homes? Right? And so what I'm trying to say is that when you. When you're creating an Airbnb, you're creating it for a very specific demographic. And the question then becomes, is that demographic saturated for that market? And what we found in Scottsdale was that the market that we were targeting or the demographic that we were targeting was not saturated, but the Phoenix market as a whole was more saturated in comparison to other places for a variety of reasons. And so, yes, without a doubt, it's possible for the property within a market to still perform. That's underperforming.

B (36:45)

And, John, I love that. That takes so much. You know, you and I, we chatted a couple of weeks ago, and you share that same logic with me. And I was like, dude, I've never thought about it that way, but it makes so much sense. Like, saturation is really at the property level, and who are you competing against? Not necessarily just what the market is doing. So I love that. Take now, guys, there's there's really this Airbnb amenities arms race that's happening right now in the industry. How important are amenities for profitability? And which amenities have you seen drive maybe the biggest value? Jamie, we'll start with you.

D (37:21)

Is the answer. It depends. So we at airdna, I've got a huge team of data scientists and researchers and we've been trying to like really understand the answer to this question of and take a hot tub, plop it into any market around the country and what is that incremental value going to be? And it varies dramatically. But something I want to call out is like it varies in ways that I think are very logical. As if you think about investing in maybe some of these smaller markets or more rural areas, like the homes that you're investing in is you are creating that destination. Like there's not going to be a lot of demand drivers nearby. People are going because your home is amenitized and the incremental value of those amenities is like double that of what we see in some of the larger markets. So you look at our typical coastal market, you get like a 10% ADR increase. You look like at a small city rural area, you get a 21% ADR increase. A similar impact with saunas or where it's an almost nothing. And like a beach market for adding a sauna, it's like a 10% increase in a more rural market. So people are willing to pay for those amenities if there's not going to be a lot of other things to do nearby. And then, and there's some things are the exact opposite in terms of the impact. So we're looking at EV chargers. Like if you're a beach or mountain market that's within a two or three hour drive of a major metro, having an EV charger can make a 5% difference on, on ADR. And that can be a huge incremental value for a relatively low cost.

B (39:14)

Yeah, I, I feel like the amenities discussion is such an important one because people just think that if they just stuff their listing with a bunch of different things that it's going to, to make the difference. And that's partially true. Right. And you know, Jamie, you just alluded to that. But I think there's also maybe an upper limit on the return of those amenities as well. And if you are in an incredibly small market where the ceiling on revenue is $100,000, it doesn't matter if you put Disneyland in your backyard. Right. It's like the, the cap is the cap. Right. So you've got to be able to gauge what is the return on that investment and not just, you know, can I, can I actually add it to.

A (39:54)

The property that, that goes the same for long term rentals too is in, in your market, you can't go and put granite countertops and exp. Expect to get another $200 in rent per month because there's just the cap that people won't pay more than that even if you go and add all of these super nice high end finishes. So it's like the same thing as finding that fine line of, you know, what to add and where to stop. But also like the maintenance and the upkeep of that amenity, like a hot tub. I think I don't have any at my properties. I think of like, okay, do, do you have to have somebody come and drain it every time? Do we have maintenance on it? You know, issues, it's not working, things like that. So I think also kind of thinking about what you want to deal with.

B (40:39)

Also for sure we stopped buying air hockey tables for that reason. Like they're just like so hard to maintain. The little fans kept going out. Handyman aren't super knowledgeable of how to, you know, work with those. So we stopped buying air hockey tables for that reason. John, what about you? What's your take on the Airbnb amenities? Arms race.

C (40:54)

The question is, are they important? How important are they? Right? The, the answ. Like without a doubt, they're extraordinarily important in today's Airbnb space. I always like to explain this in a couple different ways. So, you know, if, if Jamie has an Airbnb with no amenities, he's selling bedrooms, bathrooms, living room, dining room and a kitchen. Right? But then if I have my home, I'm selling all those exact same things. Every single Airbnb sells those exact same things. Right? But if I then am also offering a fire pit, a hot tub and a pickleball court, I now have these additional things that somebody is buying from me for the three days that they are going to be there. Therefore, that's going to help me put my be able to sell my property at a higher pay nightly rate and at a higher occupancy because it's going to be easier for me to get the booking, especially if I lower that that nightly rate to match Jamie. It's going to be an obvious choice that they just get more with me. Right. I kind of like to explain it. Like if you take like a regular car and then you take a truck, a truck is Almost always more expensive because it has a truck bed. You can just do more things with a truck, right? And so when you get this Airbnb that just has more amenities, more things to do, more entertainment while on vacation, people are naturally going to book it more easily and at a higher nightly rate. But I'm glad Jamie had to say it. I didn't have to say it. It depends, right? It depends on so many factors. Is a hot tub important in Michigan? Yes. Is it important in the Keys? Probably not, right? So it's like, you know, logically you got to think about, like, what amenity makes the most sense here? And then from there it's, you know, like you just said, Tony, it's not just about throwing a bunch of amenities at it. It's thinking, who is my demographic? And now let's create a space for them. One thing I've seen multiple times and I always just kind of like laugh at it, is a bachelorette themed homes with jungle gyms in the backyard. Right? So a full out pink home and it's got a jungle gym in the backyard. I'm like, what are we doing here?

B (42:45)

You know what I mean?

C (42:46)

Who are we targeting? And so, you know, it's like create the experience through the amenities, right? And they're super, super, super important. They just give you a leg up. There's, you know, pools are obviously one of the biggest revenue drivers. The bigger the amenity, the more you can tend to see it. Next up. Yeah, sorry, pools. Pools are, are definitely one of the biggest revenue drivers. Tech. Technically, the bigger the amenity, the more you're going to see that pull from the amenity. But they're just really important.

D (43:17)

I'll say. We did not want bachelorette and bachelor parties in our property, so we put the jungle in to purposely deter people from booking our property for that purpose.

B (43:27)

Or Jim, you just encouraged everyone to book the bachelor party and bring their kids along. So now you're dealing with both groups.

A (43:33)

Every mother's dream. Bringing your kids to a bachelor party.

B (43:38)

All right, guys, so we've learned how to pick the right property. But staying profitable is an entirely new challenge. So after the break, we'll look at how today's top hosts are adapting to win in 2025.

E (43:47)

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C (46:19)

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B (47:19)

Okay, so we've talked about markets and properties, but now let's focus on what comes next. How are hosts actually adapting in 2025? So we're going to put you guys on the spot here. John, you get a pass because you mentioned this earlier by saying Scottsdale in Phoenix. So Jamie, this one comes to you. So I'm going to put you on the spot here Jamie, because everyone's wondering the same question. If you were to buy an Airbnb today, what market would you go into and why?

D (47:41)

I won't give the exact answer of where my property is, but I'll just and I told you guys it was in the North Georgia mountains. And I'm looking for drive to destinations near major metro areas that are seeing a growing population because those are you think about more people going to that destination and then that they're going to then be taking more vacations. So I want to be in an area that's going to have that strong tailwind to it and it's not necessarily like you think about a destination like Broken Bow is a great example. Right now it's in Oklahoma. It's drive to from all these major Texas markets like Dallas, Houston for Fort Worth, even even Austin, they've got all these major tailwinds of all these new people moving into those areas and now they're starting to vacation. Like it's been one of the fastest growing markets for new short term rentals for the amount of demand that's coming in. But also you look at the fastest growing MSAs, they've all been in Texas. So it sort of makes sense that this market has been able to support that. So I want to make an investment in an area that's going to have that tailwind and sort of put myself in front of the upcoming demand that's gonna eventually be there.

A (49:02)

Now John, I'll throw this one to you. Do you expect expect the short term rental landscape to consolidate at all so you're seeing smaller hosts selling and then the pros that have actually operated, you know, starting to scale. Will individuals still have an edge getting started?

C (49:20)

Without a doubt. I think I'm like very well positioned to answer this question because I worked for the largest short term rental investment fund in America as their head of data for two years. We still work with them and they even just received another 10 million plus another 90 million that's going to be coming them to buy another 300 plus properties over the, over the next three to five years. So this is the largest short term rental investment fund. Right. In a, somewhere between a five to seven year period they will have accumulated about 500 properties in America right now there's 2 million Airbnbs and I think France there's like 1.7 million. Right. So then you could just kind of keep going. The reality is that there's just, there's too much demand for short term rentals for, you know, these, these funds to be able to control and oversee all of these properties. Plus right now they're managing 150. It is unbelievably difficult to maintain those at the quality that they need to be. They actually were recently Air DNA named them as the most improved property management company in all of America, which is amazing. But I saw the work that went through to actually get to that point. I know the people, I know how hard they worked. It was insane, right? They pulled data like you wouldn't believe just on reviews to be able to figure out like which cleaners to fire. It was a nuts operation to get to that point, but they did it. But what I've seen is like to operate at that scale is just so unbelievably hard Vacasa. Look at their stock market or their stock price, right? What's happened with them? Look at evolve these, these people when they try and go bigger and bigger and bigger. It just is so hard to do in that mom and pop care and love and you know, that's what airbnb was built off of and I don't see that going anywhere. Do I think you can manage 10 and still give that same quality? For sure, right? I've been in that scenario. But to say that the str landscape is going to consolidate because of of these larger funds that are getting involved, like not at all. And I have people reach out to me all the time. Just this week I had somebody reach out and say, hey, do you want to be my head of data for a fund I'm going to open and Then I go and talk to them like how many Airbnb have you bought so far? And they're like, none. I'm like, okay, call me when you bought 10, we'll talk. Right. Like we'll see how we feel about it then. So yeah, it's, it just without a doubt the answer is that it's not going to consolidate now.

A (51:34)

Jamie, are you seeing anything different?

D (51:36)

Yeah. So we track and every host around the world how many listing they have and how inventory is consolidating or not. And in general, what we see is with the large property managers, they sort of manage about and 35% of inventory and that's been pretty steady over the past in six, seven years we've seen individual hosts go from managing about 50% of inventory to managing about 45%. So there's the, there's this middle here and this sort of middle is what I see is really expanding. And these are like, they're not the large Vacas Casagos evolves. They're not the small individual hosts like me. There's these small hyper local, some come co hosts that are managing anywhere from six to 20 listings. They're generating an amazing review scores. They're outperforming the market in terms of revpar. Like they are eating a lot of these like large property managers lunch in the markets that they're operating and we see that their sort of inventory has grown from about 10% of the market up to over 15%. So they're growing dramatically and we've seen their inventory grow at 13% year over year. This year where both individuals and large property management companies are growing like 2 or 3%. So they are absolutely expanding. And I see we see the large property managers responding in kind. So. And with Costco and Vacasa merging and they are turning into a franchise model where they're going to have locally owned and operated Costco franchises. A lot of these private equity roll ups that are out there are keeping the local brands. So people don't even know that it's part of this large national company. And they're keeping local ownership or local management and control. So they see local is better, especially for short term rentals. Like hospitality is really hard to scale and as more, more and more you keep local, the better.

C (53:52)

Jimmy, can I ask you one question on that, which is you had mentioned that the very large property management companies like the Vacas have steadily owned about 35% of the entire market over the past six years. But yet the smaller property management companies have increased their market share by 5%. Meaning that the. They're really. That 5% is all from just individual hosts. Right. So individual hosts are handing over their properties to smaller property management companies. But yet somehow these vacas and larger companies are still in control of the 35%. I would have thought for sure it'd be the exact opposite because we see such low performance from Vacasa type companies that you would assume that those really well managed property management companies that are smaller would be gobbling up their clients left, right and center. But that's not the case.

D (54:41)

Not the case. And we do see a lot of these property management companies growing and they're raising money, they're growing their funds. We have seen Vacasa give up a lot of their inventory. But for. And every vacasa that's out there, there's a new one that's at 100, 150 listings that is growing super fast. And you see great examples of those in our sort of best property management company list. Like there's some great examples of ones that are scaling and doing it efficiently. I would say this can account for too, that there's been a lot that were single, maybe two units in 2018, 2019 that had enough experience that during this short terminal boom in investing, they greatly expanded their number of units that they owned and managed themselves. So we did see this emergence of small to middle size operators happen as people expanded their portfolio.

C (55:37)

Gotcha. When you. Just to clarify too, when you guys asked that question, I figured you were talking about the consolidation of like investment funds buying up all the homes. But when it comes to property management companies and those size, a lot of people are definitely building businesses in that, you know, 5 to 50 management. It's a great business to, to own and very scalable as well.

A (55:56)

So no, it was great to get your viewpoint on that because it was very interesting to see like how much they actually own compared to individuals.

B (56:03)

Yeah, guys, you know, I've absolutely loved this discussion and I appreciate the insights that both of you have shared. And I guess in closing I got one last question for you guys. But I think what we're seeing right now in the short term rental industry is what we've seen in other industries in, you know, the modern US economy as well. I'm in my 30s, so I, you know, I was young when the dot com crash happened. I was alive and very much impacted by the 2008 crash. But it was the same thing, right? Like there was all this hype around this new thing that was coming out initial. People got really really great returns. And then too many people piled in. Bubble happens, bubble pops. A lot of people get hurt. But the Internet's still here, right? Like the dot com crash shouldn't kill the Internet. Real estate investing is still here. 2008 didn't kill off real estate investing. And I believe that the Airbnb industry has gone through the same thing where a lot of the early folks made incredible returns, drove a lot of hype. A lot of people who had no business maybe getting into the short term rental industry did it in hopes of chasing or capturing some of that gold. The bubble popped and now we're seeing it mature and stabilize. So my last question for you guys is, as we look forward, you know, the next five, 10, 30 years in the short term rental industry, what do you guys see as just like the foundational things that will allow people to remain successful now that we're entering into this new kind of mature phase of the industry? And John, we can start with you.

C (57:32)

Love that question. I kind of mentioned this already, like the strategy that we go for when it comes to finding these properties and how conservative I am. I'm conservative in the sense of like how I'm estimating what the revenue is going to be, but also what we need to do to outperform our competition. So with every single property that we are trying to find, we are trying to think how could we have an advantage over our competition for the next five to 10 years? Now, there's a variety of different things that allow for that to happen. As an example, there's a property we're looking at, looking at right now in North Georgia. Not near you, Jamie, so no worries. But it's in North Georgia and almost nobody has flat land out there. But this has this one little spot where you can throw a pickleball court on it. And I, I find it so fascinating because like, nobody within this like 20 minute drive of this little town has a pickleball court because there's just no flat land. That's a gigantic advantage that you're going to have forever. Another good example of this is like take the, the, the south east of Florida, which is like you're essentially your West Palm all the way down to Miami. Almost all of that land is built right? Like if you look at a map, they've got the, the water on the one side and then they have that Everglades on the other side, right? So there's almost no land in West Palm in that strip to continue to out build and outperform. And so in other Words, whatever is built is what it's going to be and the price is just going to continue to go up like we have seen for ever when it comes to real estate. And eventually it's going to hit a point where the real estate is going to be so expensive that there's no return that you can get from those properties. Right now, the way I look at it is that some of those properties and some of those lots have massive backyards. That's their competitive advantage. And if you get them at the right price and put them together properly, eventually the home prices are going to go so high that there's no more cash flow left. But you've locked in a property that's that, that can cash flow because of the purchase price. And your neighbors can't outperform you because they don't have a large backyard. Right. And if somebody goes and buys this mega mansion, they're not gonna be able to do anything. So like the land itself gives you this advantage. And so I'm always looking for those types of opportunities where there's just built in moats around the property for the next five to 10 years. And if you can continue to hold onto that property for five to 10 years, everyone looks like a genius who holds on to real estate that long. Right. So that's the objective when it comes to that.

B (59:46)

Love that approach. And I love what you said about the moat. And I talk about that so often. And there, there's location, there's size of the property, size of the lot. There's a construction quality, there's a uniqueness of the construction. If I have a tree house, it's like, you know, cantilevered off the side of a mountain and you got to take like a glass escalator to get down to it. Like there's all these different things you can do, but it's like, how can you build that moat? I, I love that, man. Jimmy, what, what about you? What's your take? What's the foundational things we should be focusing on to survive and, and thrive going into the next five, 10, 30 years?

D (60:16)

Yeah, I, I'm going to zoom out. You gave me the permission to talk about 30 years from now. So. And high level, you see this and greatly expanding middle class globally. And so you're going to have a billion people from China and India sort of, and move from lower income to middle income. And what do you want to do when you're in the middle income? You want to travel. And we're seeing so many more people begin to travel Internationally, US is one of those top destinations for the first world countries. We see people trading things for experiences that if you look at the share of every dollar spent, more and more people are spending on travel and experiences and they think I'm more granular on the competition that's happening between short term rentals and hotels. Like past 30 years hotel industry supply has grown at 2%. Last decade it's grown at half a percent and right now it's sort of re accelerating and it's like just below 1%. And so we've seen a way under development of hotels and you see short term rentals grabbing so much more share of overall travel spend both in the US and around the world. So if travel is going to be one of these big secular trends that more and more people are going to be spending on travel, more, more people are going to be traveling around the world coming to the US and there's just not going to be enough hotels to accommodate them. Like that's why I'm buying short term rentals and why I think that there is going to be a long term steady more and more demand coming into our sector.

B (61:55)

Jamie, I got to ask one follow up question to that and I love the long term thinking Airbnb. And John, I want to get your take on this as well but Airbnb has made a lot of changes recently that have maybe rattled or upset a lot of hosts. Right. There's the fee changes coming up here shortly. There was the chargeback thing that they did recently, their changes in their cancellation policies. There's a lot more people now who are talking about building independent of Airbnb and obviously they are the dominant player in the short term rental single family space. But when you think about hotels, think like Hilton doesn't just rely on booking.com and you know, kayak and you know, name the website, right? Like Hilton has the Hilton brand, Marriott has Marriott brand. Do you guys think that we'll see more single family short term rental brands that grow to obviously maybe not the size of a Hilton, but they grow in the mold of a Hilton or Marriott where they are getting the majority of their reservations, maybe direct. So Jamie, you know 30000 foot view, 30 years out. Do you, do you see that on the horizon?

D (63:00)

Yeah, and absolutely. And it's in and at Air DNA we're putting our money where our mouth is. Like if you're watching the video, I'm wearing an uplifting shirt. We bought Uplisting. It's a property management system about a year and a Half ago and why we do it, we saw that trend of like Airbnb's dominance in the sector is going to decline a bit. And it's because people, as they build their businesses, they need to be multi channel, they need to be on vrbo, they need to be on booking, they need to have a direct booking site. And we wanted to give host the tools to be able to do that. And now when you go to Air DNA, you get the option of you can buy a subscription like you've done always, or you can pay an additional 25 months and we're going to throw an uplifting. And so you can go multi channel, you can run your business in an automated way. And we see that's long term where the industry is going to be going.

B (63:52)

John, what about for you?

C (63:54)

I might have a different answer, but can I ask a clarifying, clarifying question? When you say like that the Hilton brand and talking about, you know, individual hosts doing this, are you saying like somebody buys, has one Airbnb, let's just say. And they then turn that into its own brand and have a direct booking site specifically for that one Airbnb.

B (64:12)

I think both right at the micro level where it's just like, hey, I'm one host, I've got a really killer property. I'm going to do my best to like brand this and make it its own thing. Like, I don't know if you guys are familiar with the Joshua Tree House, but they're like one of the first brands that I saw on social media where they had a really beautiful home in Joshua Tree and their social media was driving the majority of their bookings. But then there's also on the other side where like there are the funds, there's Wander who are building these brands and they're not Hilton, but they're the short term rental equivalent of that. So both of those at a macro kind of large scale and in a micro individual host.

C (64:45)

So the macro I definitely agree with, especially like with the brand you just mentioned, Wander. You see a lot of this where these specific niches are turning into like their own sort of booking site. So like we have one here in Canada called Canada Cottages or something along those lines. And my fiance owns an Airbnb in Canada and she actually gets more bookings from that website than she does from Airbnb. There's just a little, you know, more demand for that. I've seen one for Hocking Hills in Ohio, right? That's that national park out there. So I've seen there's One specifically for that wanders like a good example of like, that more luxury type style. So I definitely see those ones for minor. There's a couple of wanderers out there, so I'm not sure if we're talking about the same one. There's one that's all about luxury and it's really, really beautiful. But when it comes to, like, the individual hosts, that's where I'm still not sold. And I've heard a lot of people talking about this, and I'm curious to see how it's going to play out over the next five years. Because one of the reasons I loved doing Airbnb in the first place when I first started doing this back in like 2017, was that Airbnb was the marketing. Right. I always knew I wanted to own a business, but I didn't know how to do marketing. And I was like, well, Airbnb took care of that and so now I can, now I can have that done. And so with these individual booking sites, you have to then learn how to be marketing, right? You then have to learn how to go viral, have that website create the content on, on a regular basis and like, get people to actually come to your place. And the more unique your place is, the better you'll be able to do that. The better you're at marketing, the better you'll be able to do that. But there are going to be also tons of homes that are just like, you know, I'm in the right location, I've got the bedrooms that you're looking for, come stay at my place. You know what I mean? Like, a property in the middle of Scottsdale doesn't necessarily need to have its own booking channel because there's so much demand in that area through Airbnb, it's hard to stand out. So I think it depends on the different scenarios and situations in the property type in the macro versus micro. But, you know, I, I don't see any negative in doing it right. I don't see any downside. Let's figuring it out. Trying to take control of your listing, having, you know, being able to keep more of that revenue that's coming through for putting in that additional work. So I'm all for it.

A (66:45)

Yeah. One last thing before we close out here is emails. So like everybody says, you know, you build your following on social media, you're building your personal brand. Collect emails, because Facebook could go away. TikTok, we've already gotten threatened is going away. Do you think there's some other kind of capture that you should be doing for your short term rentals. Say Airbnb goes away or VRBO goes away or something like that where you have your own collection of emails per se, for sure.

C (67:15)

I mean emails are, it comes back to like Marketing 101. Right. So you know, when I, I mean I've been trying to build up a online following for years now, it's, it's hard. You know what I mean? I almost swore there. It's hard, right? And you know, one of the big things you want to do is, is get those emails and be able to provide value through those emails and let people know you exist. And that's sort of like the rock of, or your foundation when it comes to marketing. So yeah, couldn't recommend emails enough. Um, but there's a lot to the entire marketing strategy you'd have to get, you'd have to do. Not trying to scare anybody saying like try it, like genuinely try it. Try and make it happen if you can.

A (67:50)

John, you probably just need to dance more to get those followers and those views up. Well, thank you guys so much for joining us today. We really appreciated it. Jamie, where can people reach out to you and find out more information?

D (68:02)

Yeah, and feel free to reach out to me on LinkedIn if you have any questions or find Airdna at airdna co. We do a blog where we. It's free. You can get the latest trends on us short term rentals and get a sense of where the market's going and have our own podcast, the STR Data Lab where we update every week on trends across short term rentals around the world.

A (68:24)

And John, where can people find you?

C (68:26)

I recommend just going straight to our website, strsearch.com I've got a free Airbnb data course on there, so it's free seven days. Learn exactly how to analyze data and markets and be able to get good at finding a good property. Can't recommend it enough. That's the best place to go if you really want to find how to reach out to me. If you go there, you'll figure out how to reach out to me. So strsearch.com is a great resource for learning Airbnb data.

A (68:52)

John and Jamie, thank you so much. I learned so much through this episode. So I really appreciate you both taking the time to enlighten us and to share your knowledge and information with us today. I'm Ashley, he is Tony and thank you guys so much for listening. We'll see you on the next episode.

E (69:09)

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B (70:01)

If you're watching this, we want you to apply to be a guest on the Real Estate Rookie Podcast. That's right, Ashley and I are looking for amazing stories just like yours to be a part of our Real Estate Rookie Podcast. Now look, you don't need to be an expert. You don't need to have done thousands of deals. Even if you've done one deal, your story could help inspire the next listener.

A (70:18)

As a rookie investor. Especially if you just got your first deal. It is all fresh in your minds and you are the best person to tell your story. Give your experience on how you got it done to help someone else get their first deal.

B (70:31)

So head over to biggerpockets.com/guest if you want to be a part of our show again. That's biggerpockets.com com guest and we'd love to have you on.