Find a Market That Has Great Airbnb Potential For Income

Find a Market That Has Great Airbnb Potential For Income

Senior Loan Officer
Brian Decker
Published on October 18, 2021

Find a Market That Has Great Airbnb Potential For Income

My #1 SECRET to Finding Great Airbnb Properties for Passive Income

Airbnbs can be an amazing source of passive income. A great Airbnb can generate far more rent than the same property would as a long-term rental, far outstripping the mortgage, expenses, and professional management costs to deliver money to your mailbox for years to come.

But many people rely on vague "gut feelings" to try and evaluate a property's potential as an Airbnb. When it comes to my financial security, family, and legacy, I don't like to follow my gut - I like to follow data.

I'm about to show you my secret weapon - the online tool I have used to accumulate a portfolio of Airbnb properties that generate passive income beyond my wildest dreams. I'm going to show you how you can do the same, in three easy steps…

How Can You Make Passive Income With Airbnb?

Step 1: The Secret Weapon - gives you an unfair advantage in the search for a profitable Airbnb property. If you have an address in mind, or simply a zip code, you can enter it into and get back a wealth of information.

For starters, the site gives the address or neighborhood you queried an overall market grade in the form of a "letter grade" - A, B, C, etc. Want the best chance of success? Only pick "A" properties.

The market grade breaks down into five categories - Rental Demand, Revenue Growth, Seasonality, Regulation, and Investability.

Rental demand and revenue growth are fairly self-explanatory. Seasonality might mean that the market is only hot at certain times of the year, which could create cash flow issues - after all, your mortgage and insurance are due all year round.

Airbnbs face a shifting regulatory landscape. You may think heavy regulations are always a bad thing, but that's not the case. If your property happens to be grandfathered into a restrictive new regulation, you could be out there on the market with no competition. Whereas with no regulation, get ready for blood-sport.

Finally, "investability" refers to how easy the market is to get into. Park City, UT, for example, is not very "investable" because it's just so expensive. You have to be a millionaire already to even acquire entry-level property. goes beyond these qualitative assessments, though, and drills down to the numbers, presenting you with:

  • Average Daily Rate (ADR). How much daily rent you can expect? You can refine this figure based on the property type - 1 bed, 2 bed, 3 bed, etc.
  • Occupancy Rate. How much of the year can you expect to have a paying guest? Again, refining the list by property type may reveal hidden gems. You may find that two-bedroom condos are rented 40% of the year, whereas five-bedroom houses are rented 90% of the year. Clearly, five beds are in high demand. By choosing a five-bedroom house, you could benefit heavily from reduced competition.
  • Revenue. How much revenue your Airbnb might be expected to generate per month in this market.

That's a ton of data to work with, a crystal ball into the potential profitability of this home or market.

Of course, this crystal ball comes with a cost. is a paid tool. If you don't want to pay for the tool, however, Modern Lending has a solution for you, which I will explain in Step #3.

Step 2 - Get Pre-Approved

So, you've found the perfect Airbnb property … but can you qualify for the financing? The best way to find out is to get pre-approved for a mortgage loan. Your pre-approval depends on your income, credit, and the down payment you can afford.

The down payment is usually 20% of the purchase price - or in some cases, as little as 10%. Where will you get the money for this?

  • Personal Assets. If you have cash in your checking or savings accounts, stocks to liquidate, etc. you could use some of that wealth to make the down payment.
  • Cash-Out Refi. If you have equity in your home, you can refinance and pull cash out for the down payment on your investment property.
  • Borrow Against Assets. You can often borrow 50%-75% against the value of your 401(k), for example.

You will also need to qualify based on your income. If you put down 20% instead of 10%, Modern Lending can use some of the projected rental income of your future Airbnb to supplement your work or business income. If you have lots of savings but little income, this might be enough to get you across the finish line.

Step 3 - Finalize the Proforma

Remember I said that if you didn't want to pay for, I had a solution for you? Here it is … if Modern Lending pre-approves you for a loan on your Airbnb deal, we will go ahead and use our own paid account to pull a report for you. All that data, our treat.

We will then help you prepare a proforma - a projection of income and expenses, including management costs, cleaning costs, etc. - to determine your net operating income (NOI).

We then compare that NOI to the mortgage payment you were pre-approved for. If the NOI is higher than the mortgage payment, game over! Full steam ahead to closing.

Airbnb is such a robust business model; we often find that the NOI far exceeds the mortgage payment. We might see an NOI of $6,000 against a mortgage payment of $3,000. That's $3,000 in projected passive income, every month. Think you can buy with confidence looking at a proforma like that?

Ready to get started? Click here to fill out a quick questionnaire, and a member of the Modern Lending team will get right back to you, and get you started on your journey to Airbnb passive-income prosperity!

Senior Loan Officer
Brian Decker Senior Loan Officer
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