Podcast - Air BNB Rentals

Stefan Angelini is Joined by Jordan De Jong to discuss investing into Air BNB Rentals. You'll find out how you can get access to some of Australia's best real estate assets and the why this might be the best investment type for you.

Stefan Angelini

Hey guest. Welcome again to another episode of the investor types podcast we're talking about today is investing in residential property, but actually taken a different approach to the rental and actually working on Airbnb and I'm here today with a lovely man. Jordan De Jong

Jordan de Jong

What's going on guys?

Stefan Angelini

Welcome mate. How do you pronounce your last name?

Jordan de Jong

De Yong it's a silent J.

Stefan Angelini

Alright. I love it.

Jordan de Jong

It's Dutch.

Stefan Angelini

I love it. So this man's got a special place in my heart, basically brought me on his podcast a short time ago to talk about our property journeys. And this is how he found out about his property journey. So what Jordan does is Jordan invest in property, big property investor, but actually renting out his properties through Airbnb. Now, tell me mate. Why do you do this?

Jordan de Jong

I think Air bnb for me, to gain that additional passive income was really a beneficial part like I was really wanting to focus on capital growth properties and obviously, in areas that are potential to grow quickly and more efficiently over time, you know, not even in the short term, but in 10 year time, but generally because rentals lag behind the property prices, right? So if you've got a 12 month contract on a on a $500,000 house, it's lease out at $20,000 per year. If that property increases to $534,000, the next year, but the rental lease is still being leased at it $20,000 that rental is being lagged behind, right? So you're always behind the ball mark. And if you pick it up at the wrong time in the market, or you know, the market, you're hot, you bought it too expensive, but you still got a you know, eight months left on the contract, to lease that's down in a low low market. Right, right. You can't, you know, you have to put more additional money into the property, you know.

Stefan Angelini

Yeah.

Jordan de Jong

That’s negatively gear.

Stefan Angelini

And you say residential yields at the moment trading between two 3%. And that's just not enough not even to maintain the property want to meet the mortgage repayments number two, so you need to look for these.

Jordan de Jong

Yeah. So for me, it was a big conundrum of you know, yeah, I'm still on the corporate ladder. I've still got my wife my income I could you fund the negatively geared property but in my mindset, you know you and I are the same. I thought like losing money? Why would I want to spend $1 to get 30 cents back? You know what I means,

Stefan Angelini

No, no.

Jordan de Jong

For me I really wanted to find you know, it's all about capital growth for me like that's obviously how you make the most of the amount of money but obviously wanted to to pay for itself as well. And Airbnb for me was that sort of strategy that was like. Okay, if I can I based all my, all my financials on only having 50% occupancy, right so I deal the numbers and I was like, look, if the place is vacant for half of the time, it's still going to pay for itself, you know, all the gas, water, everything else that you need to pay for having an Airbnb, and even even I find it a little bit extra just to pay for all the furniture and all that stuff as well. So over a 12 month period, it'll pay for itself and the furniture that I bought, so I'm not going backwards and I'm still getting that capital growth without having put extra money in.

Stefan Angelini

All right. So for the people that don't know so basically, Airbnb is a platform that's been set up where people can come on and book their holiday trips a few nights away.

Jordan de Jong

Yeah.

Stefan Angelini

And stay in your property

Jordan de Jong

Yeap.

Stefan Angelini

That you figured out.

Jordan de Jong

Yeap.

Stefan Angelini

You pay for all the bills

Jordan de Jong

And we pay for everything. Yeah, so you pay for water gas like you would any other property you're staying in that

Stefan Angelini

Yeap.

Jordan de Jong

Your own. You pay for all of the living expenses internet, there's a lot of things that you have to consider that you don't really think about straightaway.

Stefan Angelini

Yeah.

Jordan de Jong

All the furniture which is obviously a massive setup cost. And yeah, so people come and book your place and it's either in like a tourist destination or like a working hard.

Stefan Angelini

Yeap.

Jordan de Jong

I'm finding a lot of our guests these days are actually working class people. Because, you know, there's a big demand for people to come to Melbourne and work for three months on the job for three months with a contract for three months. And they need to find a place to stay while they're here and they're not going to stay in a hotel because it's small and dingy and bit over you know,

Stefan Angelini

Yeap.

Jordan de Jong

They're doing it if they're doing this nine months of the year.

Stefan Angelini

Yeah.

Jordan de Jong

They really ever hotel room.

Stefan Angelini

Sounds cooking facilities.

Jordan de Jong

Yeah, exactly. The one standard good, you know, nice community residential area.

Stefan Angelini

Yeap.

Jordan de Jong

You know, so there's a bit of a mixed bag of what you could potentially do with Airbnb.

Stefan Angelini

Yeap.

Jordan de Jong

We've obviously gone down the working route, but obviously the holiday destination is a huge one as well.

Stefan Angelini

Yeah. And after listening to you, I sort of took the leap and actually started on Air bnb one of my own properties.

Jordan de Jong

Awesome.

Stefan Angelini

Already realized how much the setup costs worth.

Jordan de Jong

Yeah.

Stefan Angelini

Getting all the furniture making sure you've got towels, make sure you got some food there fully equipped house that someone can come in there live there and start running, running basically just their normal life.

Jordan de Jong

Yeah, well, it's a hotel we did it. We did the same thing, right. So the initial setup costs now first one to two bedroom unit. And I think we spent about 12 to 14 grand, so it's actually significant. And then after we had our first guests and they checked out, and we had another guest, they checked out at 11 o'clock, we had another guest checking in at three o'clock and we're like, hold on, we should have another pair of sheets,like we gonna

Stefan Angelini

Yeah.

Jordan de Jong

Have to wash sheets and put them back on we're gonna have extra towels. We're gonna make it so you know, we rushed to Kmart and bought Holy sheets and all the towels.

Stefan Angelini

Yeah.

Jordan de Jong

You actually have to it's a hotel like

Stefan Angelini

Yeah.

Jordan de Jong

They'd be prepared for those quick changeovers and make it easy and strategically set up so that the pinpoints of Airbnb are dramatic. Like you can actually solve them quite easily

Stefan Angelini

Yeap.

Jordan de Jong

By having all these things organized.

Stefan Angelini

Yeah. But you gotta be really actives you're going to be there. And at the start, I could imagine do you what do you do all you're cleaning? When do you get a cleaner to come in?

Jordan de Jong

So we do my wife's absolute clean freak.

Stefan Angelini

Nice.

Jordan de Jong

She loves a clean area so

Stefan Angelini

Yeah.

Jordan de Jong

We get a clean up, but she'll spend two hours before the cleaning comes.

Stefan Angelini

Yeap.

Jordan de Jong

like two hours after cleaning goes so

Stefan Angelini

Wow.

Jordan de Jong

we could hire like a maid that would do all of that for us. But because she quite enjoys it's kind of therapeutic for her.

Stefan Angelini

Good.

Jordan de Jong

So she'll, you know, she'll continue doing and we've still got like long we've got a backyard got plants. So I'll be out there, cleaning the deck, mowing the lawns, trimming the plants, all that sort of stuff. And I kind of enjoy that as well.

Stefan Angelini

Okay.

Jordan de Jong

It's a bit of fun

Stefan Angelini

Yeah

Jordan de Jong

So we could hire someone to do it. A 100% of the time, when you get someone in for about two or three hours depending on how big the cleaning is. And now do the back of the work. So they'll vacuumed, they'll mop, they'll clean the windows, they'll you know, clean stove, all that sort of

Stefan Angelini

Yeah.

Jordan de Jong

Back backbreaking stuff that will annoy you over time, but my wife even likes to like she'll put the sheets on the bed.

Stefan Angelini

Yeap.

Jordan de Jong

And then she'll have like a roller and she'll like roll the sheets in cases, any hair or anything like that.

Stefan Angelini

Well.

Jordan de Jong

She just goes above and beyond. Because as you know, there's nothing worse than like going to a hotel or staying somewhere and then like you've got this big hair coming out and you're like, Oh, that's gross and you suddenly feel like the whole place is going to be filthy because you've had this one little bad experience

Stefan Angelini

100%

Jordan de Jong

So definitely active because you have to be on top of it.

Stefan Angelini

Yeap.

Jordan de Jong

You know, there's dust behind a drawer or there's you know, a stain still in the toilet. Like you have to deal with that stuff.

Stefan Angelini

Yeap.

Jordan de Jong

It's not you're a maid most of the time, you know?

Stefan Angelini

Yeah,

Jordan de Jong

Really, unless you hire someone else to do it for you.

Stefan Angelini

So one of the benefits is that you can actually charge it for the cleaning. So that means you can make an extra little clip on top

Jordan de Jong

Yeap.

Stefan Angelini

Of the actual rent you're getting if you're under the cleaning itself.

Jordan de Jong

Yeah.

Stefan Angelini

Or you can use that to pay someone else.

Jordan de Jong

Yeah, exactly.

Stefan Angelini

However, what you said is, so Airbnb works on a ratings category. So depending on how good you are as a host, or how good your guest is or what people have said about your guests. It goes onto your record.

Jordan de Jong

Yes correct.

Stefan Angelini

But what I've realized as a host is that Airbnb really tries to push you into taking anyone's you into your assets and and this made me scared. So big. I'm signed up to Airbnb, I'm ready to rent my place out, they said to me on your first three people that say your property drop your price by 20%.

Jordan de Jong

Yeap.

Stefan Angelini

But we want you to sign up to accept just anyone

Jordan de Jong

Pretty much anyone and

Stefan Angelini

So

Jordan de Jong

The worst anything is even they've got these like little milestones, so I can remember their official name, but it's like, you know, you have the first guests then you've got a 4.8 star rating, then you've got a you know, you become a super Host.

Stefan Angelini

Yeah,

Jordan de Jong

And along the way, they actually secretly, by the way they set what your requirements are, they make, you secretly have to do this. So one of the requirements is like, have a cancellation rate of less than 95%. So you can never cancel anyone because you're gonna go below the 95%. And you don't have that, you know, next level of milestone, which means you don't top in, in search rankings, your listing doesn't appear as often. And it's like this big intricate network of all these requirements that they make you have. And if you fail any of them, then you get significantly lower searches and that's what you want. You want to be searched.

Stefan Angelini

Yeah.

Jordan de Jong

So it's it's quite. Yeah, it's a bit of a tough one and you almost have to you almost are to get into accepting everyone. There's a little tip that I'll I'll let you know about how to get away from it. So

Stefan Angelini

Give me a tip

Jordan de Jong

If so say you've got a guest that books your place in there look a bit iffy, they've got no reviews, they look a bit dodgy, you know,

Stefan Angelini

Yeap.

Jordan de Jong

You're not sure, you're uncomfortable, you can actually send them a special offer. And what this does is it technically behind the scenes pre approves their offer, but if you spend that send the special offer, you know, say it was for two nights and you send a special offer back at five grand, they're not going to accept it right.

Stefan Angelini

Okay.

Jordan de Jong

But instantly, you can then retract the special offer and decline this day. So you don't have to that's considered an accepting so it doesn't go towards your your score or anything like that in the background, but it it looks like you've accepted but then you've retracted. So it’s fine.

Stefan Angelini

Well.

Jordan de Jong

That's a little trick to get around it if you need to.

Stefan Angelini

Okay, all right. All right. Well, because and the reason like you need these tips, because if they're forcing you into taking people on or even I pre approved guests on give them 20 24 hours they give me 24 hours to pre approve the guests.

Jordan de Jong

Yeah.

Stefan Angelini

And well, you can't even look into their profile properly.

Jordan de Jong

I know.

Stefan Angelini

To see exactly who they are.

Jordan de Jong

Yeah,

Stefan Angelini

So kill me. And the reason they kill me is because these horror stories

Jordan de Jong

Yeah,

Stefan Angelini

You hear about parties being had at at Air bnb locations. And then the host is just sort of left sitting there holding their hands gone well now got destroyed property

Jordan de Jong

Yeah.

Stefan Angelini

because someone decided to rent out my property and have a party.

Jordan de Jong

Yeah, yeah.

Stefan Angelini

You had many things happen.

Jordan de Jong

Yeah, we've had not not anything like really significant but we have had about two horror stories. So the first one was probably I think it was our third guests. And there were four young girl backpackers from Sweden, right.

Stefan Angelini

Yeah.

Jordan de Jong

And you know, we I think at that time, as you said, the discount was applying at 20% discount for your first star right so there we

Stefan Angelini

Yeah.

Jordan de Jong

Get the property at like 80 bucks.

Stefan Angelini

Yeah.

Jordan de Jong

Between four of them it's 20 bucks, it is cheaper than going to a hostel.

Stefan Angelini

That’s too okay.

Jordan de Jong

Right? You know what I mean? So, yeah, so they stay they stay for about two weeks and then like when we when we went to go into the property, to clean it out there was like cracked egg shells all over the floor and like there was like stains on the carpet and like this all this mess everywhere.

Stefan Angelini

They didn't care about their it.

Jordan de Jong

No. They care all was their first day the young girls that you know, you know maybe they weren't brought up in a house that was generally clean all the times

Stefan Angelini

Yeap

Jordan de Jong

not not blaming them, but you know, they just don't have that sort of standard of living.

Stefan Angelini

Okay,

Jordan de Jong

And a lot of people think it's a hotel, you know what I mean? So they expect you to wash the sheets and clean the house and you can leave a mess and all that sort of stuff where you know, the community around Airbnb is really just to you know, look after the house like it's your own, like you come in to stay if you if you stay and watch the sheets, put the put the towels away, you know, get it prepared for the next guest that that's how the friendly community works.

Stefan Angelini

Yeah.

Jordan de Jong

And the other second horror story that I have had was having someone local stay in our property. So we had a, we had a I think he was like 25 or 26 or something like that. He said he was from Perth and he was from Melbourne originally and his family still lived in Melbourne is like Well, I'm coming down from my sister's 19th birthday, we want to stay close to the family because it's all going to be you know, nice and friendly and whatever. Look, the profile picture looked all right.

Stefan Angelini

Yeah.

Jordan de Jong

And I was like, okay, whatever. And we were we had a bit of a gap. So I was like, Yeah, I have to book it in because otherwise I'm going to miss out on my occupancy right. So booked him in, he arrives and we've actually like he arrives, we've got a camera on the front of our door. So it's like it's called August and basically, it picks up on a motion sensor. So as soon as it goes off, you can pick it up on your phone and you can see people walking pass and I've got that because I've got like a keypad lock so if they click the doorbell I can actually speak to them and be like hey, how are you? Welcome to the house I can unlock the front door from my phone so it's all like really synchronized

Stefan Angelini

Wow.

Jordan de Jong

Makes it really easy right

Stefan Angelini

Smart

Jordan de Jong

But on the

Stefan Angelini

Smart

Jordan de Jong

Benefit side I could see who's coming in

Stefan Angelini

Yeah, yeah.

Jordan de Jong

If they look like their profile that sort of stuff. So all good at the start like there wasn't no it was just two of them arriving I can say that property. Anyway, about three hours later, like they their dad started rocking out. Their cousin started dropping off there this this bloody notification thing was going for 10 times when people coming in coming in coming in, and then there's like six people at the property 10 people at the property and like, okay, you know, it's family but, you know, why can't you go to the family's house while you have to come to the Air bnb.

Stefan Angelini

Yeah. Yeah.

Jordan de Jong

Like it's so I'm protective, you know?

Stefan Angelini

Of course

Jordan de Jong

And then, so that was fine, they left away, but then like three of them that night I got a notification and then it was like, there was like four people coming in five people coming in and that is guy had like a beer in his hand and he gave the finger get to the camera. And I was actually I was actually in Sydney at the time, and I was up and I was this what's this bloke and I'm like whoooaah,

Stefan Angelini

No.

Jordan de Jong

Like I'm trouble here. And you hear those horror stories about you know, them breaking your house and having big parties and all that sort of stuff and

Stefan Angelini

You get scared.

Jordan de Jong

And it's instantly what you think, you know, you're like, oh, man, he's gonna trash my house. So they left a little bit messy wasn't too bad, but the good the plus side of that was I've actually got an additional guests cost.

Stefan Angelini

Yeap.

Jordan de Jong

So if you don't claim that you've got two or more like if you claim that you got two guests coming, but there's actually four I charge an extra $40 a night I guess, right? If you don't Specify when you booking. So actually ping I said, Hey, here’s the proof. You've had 23 4 additional people stay on this night, I'm gonna charge you extra $40 per person per night. And the best part about it was they were like, No, no, no, we didn't have it. Then Air bnb got involved. And I was like, he's the proof. And now like, Okay, fair enough. I tried to ping them. And they didn't actually pay but Airbnb support was like, Hey, we're really sorry about the experience that you have will pay it for them so that actually pay me

Stefan Angelini

Well.

Jordan de Jong

For this incident we have so that was kind of a it was a little bit of a win because I didn't want to have that bad experience. And there's some you know, benefits

Stefan Angelini

Okay.

Jordan de Jong

Kind of do look after you a little bit.

Stefan Angelini

Yeap.

Jordan de Jong

But yeah, you know, if the house was trashed, that that scenario could have been 10 times worse.

Stefan Angelini

Than that. Fair enough.

Jordan de Jong

Yeah.

Stefan Angelini

But you've obviously now implemented some strategies to offset things like that happening.

Jordan de Jong

Yeah.

Stefan Angelini

How do you advertise it like you have a minimum minimum stay

Jordan de Jong

Minimum stay. yeah

Stefan Angelini

For your Airbnb? How does that work?

Jordan de Jong

Yeah.

Stefan Angelini

Explain it to me a little bit

Jordan de Jong

Yeah. So

Stefan Angelini

And who are you targeting?

Jordan de Jong

Yeah, for me directly, as I said before, because we're in that sort of working area that's sort of my demographic. So it's not a holiday destination, place to go party. It's working class people who want you know, a place to cook their meals and sleep at night. And even if they're on night shift or something like that easy access all that sort of really yet working community. And the way I sort of get that is I've got a four night minimum stay. So people can't come on a Friday and leave on a Sunday, which is normally that sort of party come to Melbourne, go to the casino, you know, those type of people.

Stefan Angelini

Yeah, that's right. too far away.

Jordan de Jong

Yeah. Exactly.

Stefan Angelini

Yeah too right.

Jordan de Jong

So I mean, you still gonna get people that come for four nights for that sort of stuff. But, you know, you're not getting the one nighters who are trying to find a place to throw a party because that's in a local area. So and that's another thing that I do. I don't generally accept people or like, I'll ask people Hey, you know, you from Melbourne. Why are you coming to stay in Melbourne? And yet, to be honest, I'm at that point now where like, if I'm really nervous about who's coming to stay like, I'm happy to decline, I'm happy to be like, I'm sorry. Like you're I think you're a good fit for our place or whatever. And I'll actually contact the Air bnb and say, Hey, this is the reason I declined and sometimes they'll be like, Okay, fair enough. And I'll use that little secret trick I told you before about special offer and decline.

Stefan Angelini

Yeah.

Jordan de Jong

That way I can get away with it without affecting my, you know, ranking of the milestones. So that's one little trick and then yeah, just just asking questions like, you know, how long you staying for who you bring in? Why you staying? All these sort of things? Don't be intrusive ask them

Stefan Angelini

Yeah.

Jordan de Jong

Nicely.

Stefan Angelini

Yeah.

Jordan de Jong

But I think you get a good understanding of what their intentions might be for staying in your property.

Stefan Angelini

Yeah.

Jordan de Jong

Once you're comfortable with that. You never know. Like, you could be drug dealers coming to stay at your property and you won't have never you won't have an idea about can watch

Stefan Angelini

That’s right.

Jordan de Jong

You completely

Stefan Angelini

Yeah. Yeah.

Jordan de Jong

I mean, but I think, you know, check for reviews as well. So if they've got, you know, some solid history of reviews, that's all five star and great, great people look after you you'll be fine. If you get an accounts that have just been set up yesterday, and you know, their profile picture looks a bit dodgy and they got zero views. It’s a bit of red flag

Stefan Angelini

Yeah, that's right. Watch out for that offside offside, actually having calls with people so making phone calls,

Jordan de Jong

Oh well.

Stefan Angelini

Video calls, using one Whatsapp,

Jordan de Jong

Yeap.

Stefan Angelini

Old lady from Singapore book the place and I'm like,

Jordan de Jong

Yeap.

Stefan Angelini

Okay, well I don't really trust this. Let's see what happens.

Jordan de Jong

Yeah

Stefan Angelini

Grab her a video call on WhatsApp and was able to chat to her face to face

Jordan de Jong

Well.

Stefan Angelini

so got me a lot more confidence

Jordan de Jong

Yeah.

Stefan Angelini

In my place hopefully won't

Jordan de Jong

Yeah.

Stefan Angelini

Nothing will happen yet but we'll see what happens. So we know that Airbnb with your is different to your general residential property investment strategy, we buy a property, you get a tenant in there that's hopefully in there for 12 months might sell it for five years.

Jordan de Jong

Yeah.

Stefan Angelini

You might have rent increases you might not but generally nowadays, you're losing cash

Jordan de Jong

Yeah.

Stefan Angelini

On the investment.

Jordan de Jong

Yeah.

Stefan Angelini

So Airbnb, you really try to find that extra little bit of income, but you take a risk, because there might be a chance that you might not get that vacancy.

Jordan de Jong

Yeah. Yeah.

Stefan Angelini

Or you might not get that occupancy because you might the property might be vacant more than 50% of the time.

Jordan de Jong

Yeah.

Stefan Angelini

Who knows? Or you might start getting bad reviews.

Jordan de Jong

Yeah, Let’s hope not works

Stefan Angelini

Let's hope not true. You've got a clean, clean, a clean wife or a wife that's a clean freak. But let's say that if you're talking to people out there and

Jordan de Jong

Yeah

Stefan Angelini

Make look, Jordan, I want to do Air bnb properties. I want to rent my property through Airbnb.

Jordan de Jong

Yeah.

Stefan Angelini

What sort of person do you think they need to be? What would be their hope? What sort of investor type would they be?

Jordan de Jong

Yeah, I think for me, so I'm a data scientist by trade, right? And I'm very analytical I over analyze anything. So as I was saying before, like my number one for investing is the high capital growth like, I know, that's where I'm going to make the most amount of money over time, right?

Stefan Angelini

Yeah.

Jordan de Jong

So I think if you're looking for a capital growth area, but you don't lock those rental returns and you need some extra additional income that’s gonna be active income

Stefan Angelini

Yeap.

Jordan de Jong

And you've got a bit of free time, or you can hire a property manager to do it all for you but you get a couple little bit of a higher fee then definitely try and go for the Airbnb route through that so if you're if you’re looking for capital growth, but you don't want to be paying negative gearing, you don't have you know, solid income just in case but yet, you happy to take a little bit of a risk with potentially the property getting damaged, worst case scenario, which there's plenty of insurances for as well,

Stefan Angelini

Yeap.

Jordan de Jong

So they can sort of save themselves from there a little bit. But yeah, active investor capital growth additional income. So we actually, our properties actually completely pay for themselves plus bring in about 1000 to 1500 dollars a month on top of that. so

Stefan Angelini

Right.

Jordan de Jong

If you're looking for a bit of an extra way to save or bring some more money into the offset account so that you're paying less interest, it's a good way to do so.

Stefan Angelini

Yeah, But the main thing is, you gotta be, you gotta be willing to take on that extra little bit of risk just in case, you got be able to tend to the property,

Jordan de Jong

That's right,

Stefan Angelini

If something happens

Jordan de Jong

That's right,

Stefan Angelini

You can hire a property manager, but you need to still be there in case something does happen.

Jordan de Jong

Yeah.

Stefan Angelini

Go attend to something. When something happens.

Jordan de Jong

Yeah, exactly. And I think, you know, hiring that property manager would solve this issue, but also like, you know, we have to plan our holidays around when our guests are staying out. So if a guest checks out, we can't go away during that period because we got to clean the house and make it active. So you just be in that mindset that it's can it's a job, it's a job it’s not it's not a passive income source. It's an active income source. You have to be really available all the time. If you're off in Sydney while you got an Airbnb in Melbourne and the guests are calling you say I can't get into the front door because your electronic doorbell system isn't working. I'm in trouble. Like I

Stefan Angelini

Yeah.

Jordan de Jong

Had to go to the property within 10 minutes otherwise they're locked at the front. And you know, I'm gonna get a bad review from it. So little things like that you have to be prepared for

Stefan Angelini

Amazing, amazing man. So there's, there's one way to Jordan's unit using Airbnb strategy through property investing to generate some extra income. Thanks a lot for listening. Really appreciate it. Jordan. Mate, thank you very much for coming on. I look forward to chatting in future.

Jordan de Jong

Thanks for having me, man. It's great to catch up with you again.

Stefan Angelini

All right, thanks.

Jordan de Jong

See you guys.

Stefan Angelini

Boom. Boom

Jordan de Jong

Beautiful, man.