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Samson Kay
  • Investor
  • Chicago, IL
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Turn your house hack into an "Airbnb product" to sell to investor

Samson Kay
  • Investor
  • Chicago, IL
Posted Aug 26 2015, 15:13

Hi everyone.

Its been quite a while since I last posted. I've been working on a few larger deals this past year along with my relocation to the Chicago area, so I've been super busy. But now I finally closed on my last big sale this year so I think I'll start trolling the forums again.

Anywho, So since relocating to the chicago area, in true house hacking fashion I picked up a two flat in the reasonably priced, reasonably situated area of Humboldt Park. It wouldnt be what I would call a class A or even B neighborhood (Maybe B/C neighborhood), but its proximity to the trendy Logan square and Wickerpark/Bucktown areas, make it an ideal location for someone who drives a car and commutes everywhere. 

Looking at the numbers, with me living in one of the unit and renting out the other using traditional rental methods, I figure that I could get maybe a 800/850 per month in rent, which would barely pay my mortgage, let alone any of my expenses. 

So instead I decided to list the apartment on airbnb and gage the response. and to my surprise its been a huge success. 

I've been renting the one unit and living in the other unit now making it relatively easy to manage. Heres a snapshot of the rough numbers since I started doing this in may 2015.

Monthly Rental Income
Daily rental rate average 125/day
average days rented each month 25 out of 30 days.
total monthly rental income on average 3125

Monthly expenses
Cable $67/month
Gas(For whole building) 200/month
Electric 250/month
Water 45/month
Rental Furniture 300/month
Mortgage PITI 1770/month
Lawncare $100/month

Total monthly expenses: $2732/month

Total Monthly Cash Flow: $393/month

Not only does the other unit pay for my living expenses, it also puts almost 400+ dollars in my pocket at the end of each month. On top of that the units themselves get very little wear and tear because guests are using things like the kitchen to cook or putting holes in the walls to hang personal pictures. 

Right now, there are only a couple of unknowns:

  1. Whether or not demand will hold up through the winter months. I'm not sure that Ill be able to continue renting for 3000+ rental income during the winter months. But I figure that if i can at least rent out most if not all the weekends for the next few months in advanced, I'll at least be able to cover my mortgage and I would still be positive cash flow at the end of the year.
  2. Secondly, up untill now I've been turning over the units myself to save on the added housekeeping costs. If I decided to outsource this to a cleaning service I'd likely break even or lose a little money on those months where I dont have close to full occupancy each month.

  3. One things for sure. If I decided to set up both units in the building to airbnb, any money I make from the second unit would be pure profit in the hundreds to thousands of dollars each month. 

Which brings me to my question. 

As an investor, assuming the numbers above hold and i rent out both units, could I package the building as an "airbnb product" that is like a turnkey property that produces way better cashflows than an average rental and sell it for more money than i would get marketing it on the MLS.

I know that anything less than 4 units is not considered commercial, so cashflow methods of valuation using cap rates dont apply. But I dont think using comps to evaluate the property would accurately represent the buildings current value. 

I also think this would be an interesting take on turnkey rental investments, to basically buy and package a bunch of these buildings as "mini hotels" and sell the package to investors as a product of sorts.

Interested to see what everyone thinks of this idea.

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