How to Make 3% More Rent Automatically (Takes 5 Minutes) (Rookie Reply)

Summary

---

Real Estate Rookie Podcast – Episode Summary

Episode Title:
How to Make 3% More Rent Automatically (Takes 5 Minutes) (Rookie Reply)
Hosts: Ashley Kehr & Tony J. Robinson
Release Date: October 24, 2025

---

Episode Overview

In this Rookie Reply episode, Ashley and Tony tackle three practical, beginner-focused questions submitted by real estate novices. The main agenda: how to make your rent money work harder, strategies for finding deals in competitive markets (specifically Chicago), and a deep dive into running numbers on a potential $700,000 short-term rental (STR) acquisition. Listeners get actionable tips, honest cautions, and real examples for smooth rookie investing.

---

Key Discussion Points & Insights

1. Making Rental Income Work Harder

[00:46 – 12:43]

Question: Where should landlords keep rental income to maximize interest before paying expenses?

• Traditional Checking vs. High Yield Accounts:
  Most landlords leave rental income in standard checking accounts earning virtually no interest. Hosts agree this is a missed opportunity, especially with inflation eroding idle cash.
• Banking Platforms for Landlords:
  • Ashley’s Pick: Baselane banking platform.
    • Built for real estate investors, with rent collection, automated bookkeeping, and high-yield savings.
    • “I actually made the switch to Baselane, which is actually a banking platform built for real estate investors.” – Ashley [02:23]
  • Tony’s Pick: Relay Financial.
    • Designed for “Profit First” cash management methodology.
    • Offers multiple checking and savings accounts, automation, and robust interest rates.
    • “Relay is actually the only bank that I know of that is the bank built for managing Profit First…” – Tony [04:15]
• Comparing to CDs/Money Markets:
  • CD and money market rates are often not meaningfully higher than liquid high-yield savings accounts. Flexibility is vital for investors who require quick access.
  • “The only time a CD would make sense is if you’re really trying to force yourself to save money.” – Tony [08:55]
  • Ashley emphasizes keeping security deposits highly liquid.
• Other Digital Banking Tools:
  • Ally (3%+ APY)
  • Wealthfront (Ashley’s personal savings, 3.75%+ with referral perks)
  • Crew (Tony uses for discretionary spending, has referral boosts)
• Bank Bonuses:
  Some personal finance enthusiasts cycle between banks for recurring sign-up bonuses, though it may be cumbersome for those with many auto-pays.

Notable Quotes:

• “It makes more sense to put that [idle cash] into some sort of account that earns more interest.” – Tony [01:21]
• “I definitely don’t recommend a small local bank for your business.” – Ashley [03:06]
• “You could potentially get a couple thousand dollars a year just from doing that [bank bonus cycling].” – Ashley [11:09]

---

2. Finding Multi-Unit Deals in a Hot Market (Chicago)

[14:45 – 20:00]

Question: Why is it so hard to find cash-flowing 2–4 units in “C-ish class or better” in Chicago, and what to do about it?

• Nationwide Challenge:
  Competitive inventory and rising prices are affecting all rookies, not just those in Chicago.
• Reflect & Evaluate Deal Process: Tony breaks down possible bottlenecks:
  • Not enough deals analyzed?
  • Too-strict buy box leading to over-filtering?
  • Not submitting offers at your workable price?
  • Not getting feedback/learning from rejections?
  • “Most rookies ... never get to the point of getting a bunch of rejections. They usually get stuck at some point before that...” – Tony [16:31]
• Creativity & Due Diligence:
  Ashley shares a rookie case where a buyer spotted an additional 900 sq ft not listed (created a rentable unit). Scanning photos and envisioning alternative uses (e.g., converting a large living room to an extra bedroom) can “create” deals that may be invisible at first glance.
  • “Looking outside the box, what else can you do with the property... what additional income streams?” – Ashley [17:55]
• Actionable Advice:
  • Loosen buy box slightly.
  • Analyze more deals.
  • Make more offers—including those below list price.
  • Seek out properties with hidden or untapped value.

---

3. Running Numbers on a $700K STR (Short-Term Rental)

[23:02 – 30:09]

Question: Is this $700,000 short-term rental (with $300,000 down, $2,225/mo in payments, and $6,800 monthly gross revenue) a good deal?

• Initial Math:
  $3,800 potential monthly net = $45,600/year, about 15% cash-on-cash return. On the surface, an attractive investment.
• BUT—Critical Cautions:
  • Skepticism About Revenue Projections:
    Automated data sources like Rabu or AirDNA can be very off. Always verify figures by creating your own comp set—dig into comparable listings for property style, location, amenities, and actual bookings.
    • “I would not make a purchase decision on any short term rental property based on a revenue estimate from Rabu, from AirDNA or from any other data provider...” - Tony [24:53]
  • Gross vs. Net Revenue Confusion:
    Rabu, AirDNA, and PriceLabs all handle cleaning fees and payout estimates differently—know if numbers are including/excluding fees and adjust analysis accordingly.
    • “If you don’t understand that, you could either grossly overestimate or underestimate…” – Tony [25:32]
  • Hidden/Underestimated Expenses:
    • Setup, design, and amenities are often missed (even turnkey properties need a refresh—furniture, TVs, utensils, décor).
    • Tony recommends budgeting at least $30/sq ft for STR setup.
    • Operational costs: Cleaning, maintenance, utilities, ongoing upgrades to stay competitive.
    • Set aside revenue as a “reinvestment fund” for constant improvement, not just reserves.
• Ashley’s Take as a Rookie STR Host:
  Supplies, CapEx, and cleaning should be itemized in STR budgeting; many rookies skip software, utilities, or underestimate them.
• Big Picture:
  Do not buy purely based on positive spreadsheet numbers—dive deep into real comps, precise expense categories, and what it takes to compete.

Notable Quotes:

• “We typically recommend at least like $30 bucks per square foot to get a short term rental ready.” – Tony [28:22]
• “The revenue estimators… can’t use that same nuance of deciding which comps we should include and which ones we should exclude.” – Tony [25:48]
• “Short term rentals are different… we’ve got to worry about competition and continually improving the experience.” – Tony [29:28]

---

Memorable Moments & Quotes

• Ashley: “I really definitely like, you know, a banking platform instead. That's all encompassing.” [03:20]
• Tony (on CDs): “For day to day operational things in the portfolio, I don’t think it makes sense.” [08:55]
• Ashley (on deal creativity): “Just because it's a two bed one bath doesn't mean there's extra space to do something with.” [18:40]

---

Timestamps for Important Segments

| Topic | Timestamp | |--------------------------------------|:-------------:| | Rental income cash management | 00:46–12:43 | | Chicago deal-finding challenges | 14:45–20:00 | | STR deal deep-dive ($700K property) | 23:02–30:09 |

---

Tone & Style

The tone remains friendly, warm, and accessible, always encouraging rookies to ask “simple” questions and cautioning them where needed. Both hosts use real-life examples, a conversational style, and give actionable steps without gatekeeping or jargon overload.

---

Final Takeaways

• Move idle rental income into high-yield, landlord-friendly savings or banking platforms.
• In tough markets, widen your scope, analyze more deals, and look for hidden value.
• Don’t blindly trust STR revenue estimates—dig deep on comps, budget for setup and reinvestment, and verify every expense.

For more, listen to the full episode or join the conversation on the BiggerPockets forums!

Transcript

[A]

One of the best parts of this show is that we get to answer real questions from rookies who are in the trenches right now.

[B]

Yeah. And today's questions are all over the map. From where to stash your rental income so it's actually earning you something, to how to find deals in a tough market like Chicago, to running numbers on a $700,000 short term rental.

[A]

And the cool part is these are the same kinds of challenges that rookies everywhere are facing. Cash management, deal flow, and running STR numbers the right way. So if you've ever wondered how to maximize your rent deposits, how to break into a competitive city, or what you might be missing when analyzing an Airbnb, this episode is for you. This is the Real Estate Rookie podcast and I'm Ashley Kerr.

[B]

And I'm Tony J. Robinson. And with that, let's jump into our first question, which comes from Kevin in the Bigger Pockets forums. Kevin says, where do landlords keep rental income to earn interest before expenses? I'm looking for smart ways to maximize interest on rental income before mortgage and expense payouts. What accounts or platforms do you use? Right now I keep my rental income in a standard checking account that doesn't earn interest. On average, I bring in about 8k per month in rent and spend around 6 and a half k on mortgage and expenses. That leaves me with roughly 1500 bucks sitting idle each month, not earning anything. I'd love to hear how other landlords manage this. Are you using high yield savings accounts, multiple money market accounts, or landlord specific platform to make your cash work harder between rent collection and payouts? This is actually the cool question. I mean we're, we're on episode like I don't know, 600 and some odd, right? And I don't know if anyone's ever asked this question of like, where do we put our cash to, to make it work harder? I guess just quick context, right? When, when you have money sitting in a bank, if it's in a traditional account, it's earning usually pennies, right? If that.001%.001%. Right. Um, and when you think about inflation, it, it truly means that your money is losing value every single year that it sits there idle. So oftentimes if you have cash that you know is just going to be sitting there, it makes more sense to put that into some sort of account that earns more interest. Right. The bank is going to pay you more for leaving that money in that account. So it's, it's a really great question. Um, Ash, you're obviously Our. Our resident personal finance queen. So what is your initial recommendation to Kevin on where he should stash these funds?

[A]

Yeah, I definitely started out with one of those 0, 0 interest checking accounts, business checking accounts for my local bank. And we love local banks here, but most of the time it's for the financing piece and not actually the cash management. So I actually made the switch to Baselane, which is actually a banking platform built for real estate investors. And this is where my tenants automatically pay their rent and it goes into that account. They also have an automated bookkeeping service called Baselane Smart. And that actually automatically puts my transactions in. So it makes my accounting and bookkeeping a lot easier. But yeah, I like. And also they have the High yield savings accounts also. So not only do I like to find a bank account that, you know, is earning me some money from that high yield interest savings account, but also that makes it easier as a business owner to actually track my income and expenses. There's one bank that I had started with, is very small local bank that had like five branches. And there was no kind of automation. It was literally, I got my bank statement in the mail every month. I couldn't even go online to an online portal and like view a check. You know how you can just go and sign into your online banking and view a check as to who was written to and see the actual copy? It was a very long time before they actually got anything like that in place. I definitely don't recommend a small local bank for your business. I really definitely like, you know, a banking platform instead. That's all encompassing.

[B]

Baseline is a great option. We know a lot of folks are using Baselane. I personally use Relay Financial for all of our business banking. You guys, you know, if you follow me on Instagram @tonyj. Robinson, you probably heard me talk about Relay before. If you're on our YouTube channel, like I'm on my wife's YouTube channel, the real Estate Robinson's. We talk about it a lot there. And the reason that we kind of stumbled into Relay. I'll talk about the savings part, but the reason that we settled into Relay initially is because I'm a big fan of the Profit first methodology for managing your cash flow. And we've actually interviewed Mike McCalla, was the author of Profit first on the podcast here, so you can look that episode up. But Relay is actually the only bank that I know of that is the bank built for managing profit first or for implementing profit First. And you can have all of your different checking accounts set up and the money moves automatically. They've since added a lot of other functionality which, which makes it really great. But in addition to all those cool things about being like an online first bank and the cool technology, they also offer pretty strong interest earned on savings accounts. Now obviously these, and no matter what bank you're going with these, the interest that you'll earn will vary and fluctuate usually based on the fed funds rate. So we just had that rate come down recently and because of that a lot of these banks that offer interest on their savings accounts have probably pulled their rates down. I looked at baseline, they're just over 3%. Relay right now is just under 3% in terms of the most that you can earn. But, but that's 3% is still better than.001% than what you'd be getting. So I, I, I think for me just sticking into an account like that that's still liquid, I wouldn't put into something like a, even a money market account. I think I would be somewhat nervous for because there, there's too much fluctuation on a day to day and I want to make sure that I can access that those funds when I need it. You know a, a CD account, right. That, that's, that's locked up for too long. So just some of these savings accounts where you can earn a healthy return I think is the best, best option.

[A]

But sometimes even some of the, like the money market account or the CD is the rate is not even that much better than a high yield savings account. Like I remember looking, this was probably four years ago, five years ago I had a chunk of money that I was looking to do something with and to put it into something and it was actually better for me to put it in the high yield savings account than lock it up for six months a year into a cd. And yeah, so I think look around but also like, especially if you're, it's what is the, the purpose of that money? So like baseline I keep all my security deposits in there where I, I'm not using that money. That money is sitting there. But also if someone moves out, I have to be ready to be able to take that money out to, to refund their security deposit. As long as you know, there's no damage or anything. But if it's your rental income, you know, do you need to pay bills conveniently? Do you want to have to write a check every month? Do you want some kind of, you know, bill pay system, things like that you should be thinking of, do you want your rent deposit, your rent collection to actually be deposited into that account? Or is this just like your leftover cash flow that's actually just going to be sitting there? Maybe you're saving for a Cap X or saving for the next deal, things like that. So I also think you should be looking at what kind of bank account you want, depending on what that money is actually going to be used for, or maybe all of those things you need.

[B]

Ashton, you bring up a really good point about comparing the rates on a certificate of deposit, which typically have to lock that money up for some predetermined period of time. And the traditional high yield savings accounts and we use Ally for our personal bank and you know, they've got I think 3% on their savings accounts right now, just over 3%. So pretty much in line with what both Relay and Baselane are offering. But their high, their savings account offers a 3.4% rate. Their three month CD offers a flat 3%. So you would truly be better off in that time frame just leaving your money in, in a, in a, in a savings account. And even at 12 months is at 3.85%. It doesn't even get above 4 ever. The highest that they'll offer is the 3.65% and that's on 18 months or it looks like 3.85% on 12 months. But my point is we're talking, you know, 85 basis points, but that money is locked up for 12 months. So is it worth it? Probably not. For, for this, for this scenario. I think the only time. Action. I'm curious what you think. Like I think the only time a CD would make sense is if you're, you're really trying to force yourself to save money.

[A]

Yeah. So you don't access it.

[B]

So you don't access it at all. Maybe you got a big tax refund or you know, maybe you came into some money, you sold something and you want to make sure I really don't want to spend this money and you don't trust yourself to kind of be disciplined without that, then I think the CD is a great approach because it forces you to forget that that money exists while also earning interest on it. But for day to day operational things in the portfolio, I don't think it makes sense.

[A]

But I also wouldn't do that if you like are doing a risky project or rehab where maybe all of a sudden you might be going out of budget just because you don't want to go over budget and you don't want to use that money. Like I'd make sure you still have access to your reserves, but this is additional cash, additional savings. And you don't want to want to touch that. Like maybe saving for a down payment or something like that. You could put that in knowing it's going to be a year out or whatever till you're ready to purchase that property. But I just looked for my personal savings. I don't use Ally, but I use Wealthfront, and that actually is at 3.75%. Yeah. And if you refer someone, they'll give you a half a point boost for three months and you'll get it too. So, Tony, you need me to refer you, Anybody DM me at wealth from Rentals. I will give this to you as you get that point boost that I could get that half a point boost too.

[B]

You mentioned that. Right. So we, we also use. Yeah, I've got a really complicated banking setup. So we use Ally for like most of our bill pays and all, all those things, but for like our discretionary spending. We always have like a different account. And right now we're using this new bank that I found called Crew. And Crew kind of operates with like the digital envelope system. I actually used to use this other company called Q, but they're going through this weird restructuring things. We had to pull over, pull all of our money out. But part of the reason that I like Crew was because they offer a base APY interest rate of 3.45% for any money you have in there. But then if you refer someone, you get again a half percent boost for up to three months. And you can have up to four boosts active at one time. So that could be right. That's like an additional 2% if you were able to refer that many people in such a short time frame.

[A]

Okay, so four of you message Tony, and then one other person messaged me one at a time. One thing too that I've seen a lot of, like personal finance people that I follow on Instagram do is they change their checking account often for cash bonuses. So they'll look for like, you know, in a lot of like nationwide banks like Chase, Wells Fargo. I'll see them do this where it's like if you have X amount of like ACH payments, so like your paycheck being automatically deposited, like if you have six of them over three months or something like that, they'll deposit, like, I've seen them up as like $900. They'll deposit into your account by just fulfilling certain requirements or whatever. And there are people that I will see that will frequently change their banking based on it. Now it makes me like exhausted thinking about changing all of my auto pays. But if you could do it where you're just having your check deposited and then, you know, money transferred to another account maybe, and you don't have to change all of those, but to get 900 bucks over three months, it might be worth it to take the time to actually change, you know, your bank every three months or whatever the time period is to actually get that. I mean, you could potentially get a couple thousand dollars a year just from doing that. Yeah. Okay. Well, we have to take a short break, but we will be right back with our next question after this.

[C]

Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of the smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords. Whether it's a single family rental, a Brrr Builders risk policy, or midterm holiday guests, you get fast quotes, flexible coverage and protection for property damage, liability and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in [e-mail] landlord insurance steadily landlord Insurance Designed for the modern.

[A]

Investor in real estate. I used to juggle five different tools just to stay organized. One for leads, another for listings, and a pile of sticky notes in between. It was chaos back then. I really wish I had today's sponsor, pipedrive, the number one CRM tool for small to medium businesses and real estate agents. Everything's in one place, from notes on listings to key information on leads. So I never miss a deal. Real estate teams using pipedrive can handle four times more inbound leads. It's a powerful, simple CRM built by salespeople for salespeople. With pipedrive, you're not just managing your sales, you're supercharging them right now. If you use my link pipedrive.com biggerpockets you'll get a 30 day free trial. No credit card or payment needed.

[D]

You wouldn't tour a property blindfolded, so why guess at the Market WD Suite, a digital experience from Walker and Dunlop, helps you understand neighborhoods, evaluate opportunities and mitigate risk. From hyperlocal insights and demand drivers to automated valuations and tenant financial health, I Use WD Suite to help me make smarter decisions. It's free, fast and saves me hours of research and analysis. Built for CRE professionals like you, it puts decision ready intelligence at your fingertips. Try it [e-mail] biggerpockets mess up your.

[A]

Bookkeeping and you mess up your profits. That's why real estate investors need accounting they can trust. Turbo Tenant accounting is built for landlords automatically helping you maximize deductions, keep clean books and reduce tax season headaches. Turbo Tenant accounting lives right where you already manage your rentals. One login, one platform, everything in sync. Say goodbye to manual spreadsheets or expensive software that's not built for real estate. Don't gamble with your numbers. Run your rentals like a real business@turbo tenant.com get accounting. The second question comes from Eric. He says, I'm currently looking for my next deal in Chicago and my search has been all MLS deals. I'm searching for a 2 to 4 unit but I haven't found anything that works for me. By the way, I'm talking about CISH class and above class. No D class. I tend to be cautious and conservative with my deal analysis, but am I the only one finding it a bit difficult in Chicago? If someone could point me in the right direction, let's me no. Overall, I think deal finding in general across the country has been hard given the current market conditions. Tony, do you know anything about the Chicago market specifically?

[B]

I mean I, I personally haven't looked in Chicago, but to your point, Ashley, I, I think that what you know, Eric is describing is something that we're seeing nationwide. But I think the questions that I would pose back to him are the questions I would pose back to anyone no matter what market you're in. First he says, I haven't found anything that works for me. And I think that is like the, the piece we really need to drill down on. How are you defining quote unquote works for me, right? Are we saying that from a, there just aren't enough 2 to 4 units that are on the market, Right? So there's just simply not enough volume of deals for you to look at? Is it an issue of, hey, I'm, I'm, I'm, I've only analyzed three properties because I'm just looking at the MLS and I'm just naturally excluding a lot of these because I think they're not going to work. So it's the volume of deals analyzed or underwritten. Are you maybe analyzing a lot of deals but none of them are penciling at the listed offer prices and then you're stopping there, or are you going to the next step in submitting offers at whatever price makes the most sense for you, or are you submitting all those offers and then everyone's just saying no? Right. So there's like so many different layers that we can focus on. But I think what I see most rookies struggle with Ashley, and I'm sure you see the same is they never get to the point of getting a bunch of rejections. Right. Like, they usually get stuck at some point before that where either A, their buy box is so tight that they just can't analyze enough deals, B, they're not analyzing enough deals, or C, they've analyzed those deals, but they're not actually making the offers. And if we can just focus on pulling those three levers, I think typically we start to see more good things happen. So that. That's my take. And again, I'm making some assumptions here, but I feel one of those is probably the issue that Eric is facing.

[A]

Yeah, the first thing that I thought of actually was earlier today we interviewed a rookie investor, Esther, and she talked about how there was this property that sat on market set on market, and they kept decreasing the price and they ended up buying it. And the reason they bought it not was because the price kept on decreasing and because it, you know, all of a sudden was affordable. It was because it had 900 extra square feet that wasn't in the listing. So I think this is another lesson for all of us is that just because a deal isn't working for you, what are you going based off of and how can you get more creative? They. I think it was like 900 square feet and it was just a rec room. And they DIY YouTube university turns it into a studio apartment to rent out or I don't know if it was a studio apartment, but an apartment to rent out so they could house hack. And I think that getting creative and looking outside of the box as to what else can you do with the property, what other additional income streams? What. What is available in this property that's not in the listing? So, like, scan the photos. Does it look like maybe this property is actually bigger than they're stating are there? Like, I'm renting a property right now that it's two bedrooms and one bath, but it has two large living rooms. So I'm making that abundance. Lee clear that like, if you wanted to, you could use another living room as an office, a den, another bedroom. If you wanted to put a curtain up I guess. I don't know. But like there's more possibilities. Just because it's a two bed one bath doesn't mean there's extra space to do something with. And yeah, probably eventually we'll turn one of those living rooms into a third bedroom to really maximize the value. But it's going to rent out great now as is. So I think just looking outside the box and what other opportunities, what additional income streams can you get out of a property that's maybe not just stated there right in front of you on the listing?

[B]

All right, we're going to take a quick break before our last question, but while we're going, be sure to subscribe to the real estate Ricky YouTube channel. You can find us at Real Estate Rookie and we'll be back with more right after this.

[C]

If you want a short term rental, here's something worth knowing. Not all landlord policies are built for your type of property, and with holiday bookings, chilly weather and higher guest turnover, having the right coverage is more important than ever. Steadily offers insurance designed specifically for short term rentals, covering property damage, liability, lost rental income and even unexpected issues like bed bugs. Steadily works exclusively with real estate investors so they understand the details that make short term rentals unique and they build coverage to match it. A quick review of your rates and coverage every year can help you protect your property and your cash flow. Get a quote in [e-mail] landlordinsurance steadily rental property Insurance for the Modern Investor.

[A]

I can't tell you how many deals I lost just by being a day late on follow up. One mismessage and the buyer was gone. Back then. I really wish I had today's sponsor, pipedrive, the number one CRM tool for small to medium businesses and real estate agents. Real estate teams using pipedrive can handle four times more inbound leads. It keeps everything in one place, connects you to my email and calendar, automates reminders, and ensures every lead is moving forward. Join the over 100,000 companies and real estate agents using Pipedrive right now. If you use my link pipedrive.com biggerpockets, you'll get a 30 day free trial, no credit card or payment needed.

[D]

When I need to make a decision on my multifamily portfolio, I reach for WD Suite from Walker and Dunlop. Now I can see market rents, tenant financial health, neighborhood insights and automated valuations all in one platform. I use it to track performance against nearby properties, spot risk before it hits, and assess my next investment with real time data. It's How I stay one step ahead with clear insights I can trust. WD Suite helps me move faster, smarter and with more confidence. It's built for listeners like you and it absolutely free. If you're looking to level up your investment game, WD Suite is for you. Try [e-mail] BiggerPockets so you're about to.

[A]

Make a trade based on a friend's text but which you do you listen to is it we could buy a house in Tulum, get optioning those options. We could lose everything. Or let's do a little research, get your head in the trade and make the investment decision that's right for you. Learn [e-mail] TradeSmart when did making plans get this complicated? It's time to streamline with WhatsApp, the secure messaging app that brings the whole group together. Use polls to settle dinner plans, send event invites and pin messages so no one forgets mom 60th and never miss a meme or milestone. All protected with end to end encryption. It's time for WhatsApp message privately with everyone. Learn [e-mail] all right guys, welcome back.

[B]

We're here with our final question for today. And this question also from the BiggerPockets forums comes from Chris. And Chris says should I buy the short term rental? The purchase price is $700,000. The down payment would be $300,000. The monthly payment including taxes and insurance would be $2,225. The RABU and rabu is like a data estimator, estimates the monthly revenue at $6,800 per month. He plans to self manage and he says when I estimate supplies and capex, I see a monthly net of about $3,800. I'm an experienced property manager but newbie investor so I appreciate any advice. What am I missing? Couple of things here.

[A]

Get out your handy dandy calculator. What is our cash on cash return with a $300,000 down payment?

[B]

Yeah, and, and that was one of the things that jumped out at me. Right. I mean that's obviously a big down payment. Right? That's. I know, 300, over 700, like 40%, 42%. So it's a, it's a massive down payment and if you're netting $3,800 a month over 12 months, it's about $45,000 a year. But over $300,000 down payment which looking at about a 15% cash on cash return which honestly isn't bad, it's a strong return. Given the amount of down payment that you're putting. But I have a few very serious questions, I think to make sure that this is actually a deal worth pursuing. The first thing is the monthly revenue estimate. Chris says that Rabu estimates $6,800 per month in income. That is a great starting point to know if this deal is worth doing a deeper dive on. But I would not make a purchase decision on any short term rental property based on an revenue estimate from raboo, from Air DNA or from any other data provider because they are not accurate.

[A]

Tony, I have a question about that. When you're looking at Rabu or these other data providers, that revenue estimate, is that including cleaning fees, is that before or after Airbnb fees are paid out? Is that like gross or is that net revenue that you actually get? All said and done.

[B]

So different data providers handle this differently? I'm not honestly, Rabu I think is no disrespect to them, but just in terms of what I see from other short term rental operators, Raboo is probably on like the third tier of data providers. Everyone really focuses on Price Labs and Air DNA. And Rabu is kind of like a tier below just in terms of like, usage. From what I see from folks who are actually doing this on a daily basis. But even between Price Labs and Air DNA, they handle those two points of like cleaning fees differently. When you see a revenue estimate from Price Labs, it does not include cleaning fee income. When you see revenue estimates from Air DNA, it does include cleaning fee income. So even just those nuances between those two different platforms, if you don't understand that, you could either grossly overestimate or underestimate what the revenue potential is. Which is why first, I like to use both data sources so I can, I can go into both of those, both airdna and Price Labs, and do my analysis in both of those. But second, instead of just relying on whatever estimate these tools spit out, I want to go through and build out my own custom comp set of properties that are similar to my property in terms of size, location, design and amenities, construction quality, and see what kind of revenue do these tools think that, that those properties are doing. And the more I can find that are similar to my property, the more confidence I get in how my property might do. But the revenue estimators, they don't. They, they can't, they can't use that same nuance of deciding which comps we should include and which ones we should exclude. And that's why oftentimes those numbers are Off. So I, I would not go based on, on the, the revenue estimates that Rabu gave you.

[A]

So I guess Tony, looking at this and knowing that the revenue could be off, what about any of the expenses on this? Because not, not just as a rookie, a CR host myself, I see there's the supplies, the capex and like depending on what, you know, the revenue shows, if it's including the cleaning fees, then they need to show the cleaning expenses as to what they would pay out in fees for that. And then also like any software they would be including, are there any other expenses maybe like utilities, things like that that they're missing?

[B]

So there's two big things still that I think are missing from this. Number one, I see no mention of setup, design and amenities. The only thing they mentioned is down payment. And I think that's where a lot of new short term rental hosts make the mistake is that they only budget for acquisition and they forget to budget for setup.

[A]

So Chris is going to turnkey one. We could.

[B]

Even if it's turnkey.

[A]

Okay.

[B]

Even if it's turnkey, there's usually some level of money that we need to reinvest to make sure the property is ready for your standards. Right. It could be something as small as, hey, some of these mattresses need to be replaced or they've got, you know, the TVs from 2005 that are super outdated and you know, we've got eight different remotes and there's no smart TVs.

[A]

The TV has a back end to it, Right?

[B]

That's if he's got a back end.

[D]

Right.

[B]

You know, even, you know, forks and knives and cutlery and all those things. Like even if you're buying turnkey, there's still usually some level of investment that we need to do to, to get this property ready. We've purchased properties that are new construction turnkey that we still have had to go back and add our own elements to to make sure that we can compete. Right. So I think that is a big portion. The design, the amenities, the household essentials. We typically recommend at least like 30 bucks per square foot to get a short term rental ready. So I don't know the purchase or the square footage on this, but I mean 700,000 square feet, let's assume it's maybe like a four or five bedroom, I'll call it 2500 square feet. 30 bucks a square foot, that's another 75 grand that is not accounted for here that we would need to invest back into this deal to make it airbnb. Ready. So that's a big one. And then the second piece is what you, what you alluded to, Ashley, are the other kind of operational expenses. Cleaning fee. We're not sure if that's included in their supplies and capex number. You said supply costs. Just setting money aside and this is something that I've done more recently that we weren't doing initially. But aside from just like your reserves, having money set aside specifically to reinvest back into your property, short term rentals are different from traditional long term rentals in the sense that with the long term rental, you just have to worry about the roof, you know, the water heater, you know, the, the major things that keep that property running. But with the short term rental, we've got to worry about competition and continually improving the experience that we can give to our guests. And I think siphoning off some percentage of your revenue on a regular basis is an important thing to do as well. So it does feel like maybe there are some of the operational expenses that are being left out here as well.

[A]

Well, thank you guys so much for joining us today. I'm Ashley, he's Tony, and we'll see you guys next time for another episode of real Estate Rookie.

[C]

Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of the smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords. Whether it's a single family rental, a Brrr Builders risk policy, or midterm holiday guests, you get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in [e-mail] landlordinsurance steadily landlord insurance designed for the modern investor.

[B]

Hey rookies, 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]

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]

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