SaaS Interviews with CEOs, Startups, Founders
EP 502: 30% Annual Yield AirBNB Investing with Andrew Keene
08 Dec 2016
Chapter 1: What is the main topic discussed in this episode?
This is The Top, where I interview entrepreneurs who are number one or number two in their industry in terms of revenue or customer base. You'll learn how much revenue they're making, what their marketing funnel looks like, and how many customers they have.
I'm now at $20,000 per top. Five and six million. He is hell-bent on global domination.
Chapter 2: What inspired Andrew Keene to invest in Airbnb properties?
We just broke our 100,000 unit sold mark.
And I'm your host, Nathan Latka. Okay, Top Tribe, this week's winner of the $100 is Rich Jones. Okay, Rich Jones, he is stuck in corporate. He wants to break free. He's binging on the show.
Chapter 3: How much can you realistically earn from Airbnb investments?
For your chance to win 100 bucks every Monday morning, simply subscribe to the podcast right now on iTunes and then text the word Nathan to 33444 to prove that you did it. Many people ask me how I used email to sell my first company, Heyo, and it's simple. You want to do things like open tracking so that you know when a potential buyer actually opens your email or potential new customer.
You also want to set reminders so you can quickly know when to follow up with somebody if they haven't replied to you or use things like auto follow-up sequences. You can do all of this with a company called thetopinbox.com. In fact, I liked it so much, I bought the whole business. Go try it for free at thetopinbox.com right now. Nathan Latka here. This is episode 502.
Chapter 4: What strategies does Andrew use to achieve Super Host status on Airbnb?
Coming up tomorrow morning, you're going to learn from Alex Saidani. They've raised $125,000, giving up 5% of their business. And the question is, how do you grow it into a $2 million valuation? Good morning, folks. Nathan Latke here. Our guest today is Andrew Keen. He's the president and CEO of Alpha Shark Trading, which he originally founded as KeenOnTheMarket.com in 2011.
Prior to that, he grew up and working as a proprietary trader at the Chicago Board Options Exchange. Now, going back even further, he began his career in the prestigious Boda Capital clerk to trade program. and would eventually co-found KATL Group.
He currently actively trades futures, equity options, currency pairs, and commodities, and he's a regular guest market commentator on such networks as Bloomberg TV, CNBC, and Fox Business. His first love will always be trading, but he's arguably even more well-known for building a trading room.
He's especially proud of having taught his personal strategies to over 50,000 students over the past four years. All right, Andrew, are you ready to take us to the top?
Yeah, what's going on?
All right, cool. Dude, glad you're here. I think Bill from Revestor, who we had on recently, got us connected. And actually, you're in Austin, aren't you?
Yeah, I split time between Austin and San Diego, so currently right now I'm in San Diego. Got it.
I'm down here at the 3rd and Brazos at the Whitley in downtown Austin.
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Chapter 5: What are the risks associated with Airbnb investing in San Diego?
By the way, do you happen to know a guy named Joe Longton? No, I don't. Joe is my realtor. I was looking at some beautiful houses in Westlake and he says, Nathan, there's this trader who has these beautiful offices in downtown Austin. I thought he said on Rainy Street. You go up to the top floor and there's a car park there and it's big and it's open. I was thinking, I wonder if that's you.
I'm on Rainy Street and I work from home, so it might be. Yeah, but I've been doing that. What I've been doing is, so I moved to San Diego and then, you know, me and Bill connected through entrepreneurship organization.
Chapter 6: How does Andrew analyze potential Airbnb markets?
And, you know, he has a really cool platform. I just did a Facebook interview with him about Airbnb. And, you know, Airbnb is what I'm kind of leaning towards now, you know, as a trader and as someone who's in the finance field, you know, I have my trading account, which is a little bit different. And then, you know, you have a 10 year interest rate running at about 1.7%.
You have a lot of people out there looking for alternative investment strategies to capitalize on, you know, money they have sitting in the bank that they can't get in bonds anymore. You used to be able to park your money in bond and get capital returns on that, but you can't. And Airbnb is the most fascinating thing that I've seen in a very long time.
So I purchased a place in San Diego so I could stay here. You know, I was going to Airbnb it and stay here for free.
Yeah.
Yeah, through Bill's platform, I found the place. And, you know, Bill's platform is great. You can do, you can set stuff up for occupancy rates, set stuff up, revest it. You can set it up for occupancy rates. You can set it up for, you know, price point. You can put in location. You know, I wanted a place close to the convention center.
And for Airbnb, San Diego and Miami are the two most profitable cities.
Just to keep vacancy rates low. That was your thesis there?
Yeah, I mean, yeah, just see all the places. And then, you know, basically San Diego and Miami are the most profitable places for Airbnb. So I started renting this place out on Airbnb. I've done ample bottom research on it. So I've been, I've been trying to get into it.
I mean, profitability wise as a percentage, like smaller places, actually like a Kansas city and Cleveland are going to be better percentage wise, but I don't really want to be there or like own places there. So I started renting this place out and my, my return on capital probably this year will be about 35% of the money that I put down. That's without even appreciation of the unit.
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Chapter 7: What software tools does Andrew recommend for Airbnb hosts?
The unit was $350,000. You have to put down 20% to not pay their PMI, property mortgage insurance. And then this year, I expect... make about $20,000 on that $70,000 investment. And now I'm starting to do it a little bit more.
And I'm probably going to start, you know, like a fund where I'm going to get capital for people that are looking for alternative investment strategies that are a little bit more secure because there's no premiums really built into it. And San Diego per se is always going to have conventions and the weather's nice all year round.
uh initially bought for 350 grand put 20 down to avoid pmi to increase again monthly cash flow so you put about 70 grand down you're gonna make about 20 grand cash here in 2016. um what is driven i mean first off talk to me about vacancies so did you rent it the full time or did you live in it for a bit and then you rented other times
Well, it's funny because I wanted to split time between Austin and San Diego, and I thought I'd be in San Diego about a third of the time, and then I just put it up on every day. And the last two months, so it's only been a couple months, we've rented out like 28 and 27 of 31 days. Okay. So our occupancy rate's about... 90%, which is higher.
And then once you get to super host status, which I'm close to getting, then your occupancy rate, you have twice as much, twice as great chance of renting your place out if you're a super host because they basically advertise for you. Kind of like on Amazon, you become a quote unquote bestseller. Amazon starts advertising for you. So if you can follow a super host, then Airbnb just starts.
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Chapter 8: How does Andrew plan to scale his Airbnb investment strategy?
You can get more for your properties. And 80% of everybody that has a listing at Airbnb aren't doing it for business. They have an extra room. They're going out of the country or the state for a weekend. They're just trying to get extra capital. But looking at it as an investment. getting 35% return on capital in a year is unbelievable cash flow.
So let's talk about the risks associated with that cash flow. So you obviously can't control local governments. And we always see crazy stuff happening with the sharing economy and government officials that want to, you know, tout how powerful they are putting kind of constraints there. Is there any risk of that in San Diego? And if so, how do you measure it?
There are a lot of risks. So San Diego per se, you know, it's not illegal, but it's not HOA friendly. So most buildings in San Diego, you cannot do it because your HOA won't allow it. So getting standalone units is a way to get around that because they don't have HOAs. There was one that sold in Little Italy and I was too slow on the trigger for about $750,000.
And that would have been HOA friendly. A lot of places aren't HOA friendly. And, you know, they're trying to... through the short-term ban, and in San Diego, it actually just got declined. So they're trying to ban all short-term rentals in San Diego, and that did not pass. Doesn't mean it can't pass in the future. Your biggest risk is the short-term bill passing in a certain city.
It got passed in New York and in San Francisco. Now, Airbnb's suing San Francisco, the city that they started in. So that's the risk. But, you know, from my point of view, you can take advantage of this cash flow situation until you can't. And worse comes to worse, they ban short term rentals. What do you do? We still own the unit. So maybe it's a year or two, three, five years down the road.
But once you have the unit, you can either do a long term rental, which you're not going to get that, you know, return on investment of 35% a year. You're just going to cover your mortgage costs. Yeah, you'll get maybe, you'll make a little bit, or also you can do is you can just sell the unit. So there are always risks involved.
And I'm not saying that, I made a lot of money on the trade for trading, and I'm not saying I'm gonna take 100% of my capital that I made trading and do this, but I think as a percentage of my total net worth, it's totally doable thing.
How much have you made on trading?
Me? I think my trading account was probably around like $5 million. I've made trading.
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