I recently had a chat with the Director Of Multi-Family Prooject with Airbnb and they are reaching out to Multi-Family Investors to offer a program to help implement short-term rentals for their properties. I have talked to single family home investors who do Airbnb instead of traditional tenant models and they say that they make more money with Airbnb.
Has anyone tried this with their multi-family properties? If so how did it work out?
Curious about this because I have a property that is in a good location for it. I know there are local regulations that can prevent you from doing this but curious to see what the experiences were for those that did manage to do it.
Great question and something I have thought about as well. I'm also curious to find out if someone has done it and if so, how it has gone for them.
This is a really interesting topic and something I am actively working on. As of now I own a duplex in Steamboat, Co that is performing well under this model. We are selling off a traditional 4plex in Denver, CO and hoping to use the money to buy 1 or 2 more multifamily airbnb type rentals. I think there is potential for huge profits through this avenue and haven't seen many investors doing it. There are risks: noise and guests not feeling as if they have their own space is the hardest to manage. Overall we have been very successful and I hope to continue to explore this route. One problem I have found is financing. So far haven't found a good way to finance multiple properties. Look forward to continuing the discussion. Thanks!
On noise - professional hosts (myself including!) use NoiseAware in residential buildings. It’s a noise monitoring device which alerts the host if things get a bit out of control. We inform guests that noise monitoring device is installed and that they will be fined if the noise threshold is breached. This strategy seems to work!
I have a triplex in Miami that I Airbnb. It’s a building that has a 2/1 on top and 2 1/1s on the bottom. It’s doing so well that I’ll be converting another triplex into Airbnb units as well.
The main difference between single family and Multifamily Airbnbs is that although each unit has a separate entrance, the guests may hear noise from the other units. So, you lose some of the privacy aspects that some guests look for. Also, what happens in one unit might affect what happens in the others (like when the guests in 1 unit trashed their place, causing cockroaches to appear in the bottom unit, which led to me giving those guests a refund).
However, as an investor, it’s nice just to have 1 roof, 1 electric bill, 1 water bill. 1 place where the cleaner can put all their cleaning and restocking supplies to service all 3 units. When I bought my second triplex, I bought it as a long term rental so included the expense of sub metering the water to my rehab costs. Now that I’m Airbnbing the triplex, I don’t have to do that since I’m responsible for all the water.
I like the small multifamily Airbnbs because you’re not competing with hotels like you would with condos (and besides, who wants the drama of having the condo board suddenly deciding that Airbnb’s are no longer allowed). The guests who stay in my guest suites like that they can open their door and be outside (and smoke if they want to). They have a guaranteed parking spot in the driveway close to their unit and aren’t forced to valet like they do at a lot of condo buildings in Miami. I’ve got green space for their kids to run and play. All the perks of a single family, just with a little less privacy but also a little expensive for the guests (but more lucrative for the investor since you’ve got more than 1 listing per property.
Great idea, convert your apartment building into a short term rental. But what should we call it then? I know let's call it a hotel.
@Kyle Ransom There is upside and downside, to having a Multifamily Property offering strictly Airbnb Rentals. The obvious upside is you will command higher rents. The downside is you will have a higher turnover rate (Vacancy Rate) which means you will incur extra costs for Marketing/ Advertising, Screening Procedures, possible repairs needed, painting, cleaning units to make them move in ready for the next tenant, etc. You should know these costs, so you can determine if higher Airbnb Rents are worth the the time, energy, additional expenses, and effort that will be needed verses having Annual Leases.
I have a 30 unit Studio/Efficiency Apartment complex in Crestview, FL, which is in the Florida Panhandle 40 mins to the white sand and emerald water beaches. I rent about 1/2 or 2/3 of them to long term month to month tenants. I rent the other on week to week basis to traveling nurses, contractors, military people working on EGLIN Air Force Base, and people in moving here and needing to buy a permanent residence in the near future. I rent them with utilities and fully furnished. Works well, as I say close to 100% year round by adjusting my rates up and down to meet demand. A couple years or so ago I tried one unit on Airbnb. I had a renter for the next day within hours! It worked great, so I ended up marking my two best units into Airbnb units. A little more work with the turnover and such, but they command decent rates and help fill in gaps in vacancy’s. When I fill up, like now, I just block off the Airbnb bookings.
@Julia Bykhovskaia That is a great idea. I have a duplex that I Airbnb and the only true issue between guests are the noise the other guests are making.
For myself, short-term rentals have yielded better financial returns than single-family rentals from my duplex, however it is much more labor intensive. One thing a person should consider before making the decision is that once you convert your multi-family unit to an Airbnb property you now have to pay for things you could normally have your tenants pay for. Such as: lawn care services, televisions, furniture, decor, utilities, wifi, cable, cleaning services, towels, bedding, cutlery, cookware, refreshments, keyless entry locks, etc.
I think it just depends on your market. For some markets I think to Airbnb your multi-family units will yield greater return after expenses, but for some it may not. I strongly recommend including all the above in your expense calculations. If you spend an initial $5,000/each unit on furniture and decor and $500 a month for each unit in utility, supplies and cleaning expenses...the additional earnings a month from Airbnb versus single-family rental may not yield a greater return. Its all in the numbers for me.
This will be our third or fourth summer using AirBnB to backfill student rentals & help existing student tenants sublet for the summer. We only rent for stays of 1-week or more as with stays shorter than that we would be viewed as hoteliers and would require licensing, inspections and would have to charge tax on accommodations. We are also not interested in the workload that comes with short stays.
Over this time, we've developed a love-hate relationship with AirBnB. Their reach and convenience is a plus, but they have become a more expensive and difficult organisation with whom to work. My biggest beef is their paranoia that someone will make a deal outside of their sphere and the automated message filtering that goes along with it that prevents you from providing information such as tourism and transportation (even bus routes) contact information, etc. which limits your ability to provide service to potential guests. The site also has a propensity to change availability settings - unblocking rooms / units that have been blocked for the school year - in our calendar.
This summer we will continue to use them to fill furnished rooms in our international student house, but will not be using them to sublet apartments in our multiunit buildings. If you are going to dedicate units in multi-unit rental to short-term stays, you need to weigh the impact that will have on the contentment of your long-term tenants in the buiding.
Paula Pant of the blog "Afford Anything" (I'm not affiliated, just an avid reader) did an awesome write up on this topic. Here's a link to the first part of her 4 part series (I don't think posting this breaks any forum rules?):
The main thing I'm surprised hasn't been emphasized more in this thread is the fact that managing AIRbnb units is very time intensive (as you'll see in Paula's experiment). Although more money can be made on a monthly basis with the AIRbnb approach, it is way more hands on. You're also looking at the cost of furnishing the unit (mentioned before) and providing incidentals like soap, shampoo, kleenex, toilet paper, etc. By the time you account for the time, materials, and tax differences (many cities tack on hotel tax), your extra profit is essentially just creating a job.
I'm not trying to downplay the ability to make some extra cash with this approach; however, I view it as more of a side hustle/very hands on investment strategy. My goal is to build a portfolio of passive income producing properties (I outsource management), with the intention of dedicating as little time as possible to those properties once acquired. I'll keep acquiring those deals, and leave short term rentals to the hoteliers of the world.
Professional short term rental managers want the views of people like Paula to prevail so we have less competition. STRs are definitely more work but most of it can be automated (if you know how) and if you can get 2x - 6x of long term rent - it’s SO worth it. Not all markets allow that; you need to do research obviously. I’d argue though that anyone can find a decent performing market 1-3 hours drive from where they live. And there’s nothing wrong with investing/managing out of state
@Keith Linne I admire your due diligence and quite frankly you have some very valid points as far as it is definitely a time intensive process to get the first property up and running successfully. However, as somebody that has owned, self-managed and grown a successful portfolio of AIRBNB properties, I just have to add that the STR method ( if strategized correctly) can pull off some huge returns.
My fully furnished vacation rentals (mini resorts is what I like to call them) kick back great cash flow. Now keep in mind, in my market we have a very strong season which brings in major tourism from Snow Birds during Springtime. We also have no shortage of events, and I am able to gross between 5-7k during peak months. Now the idea is you need to establish your "breakeven" point during slower months.
All the incidentals you mentioned are write-offs as they are supplies for your business and the same property that unfurnished could yield me monthly rents of $1,250-$1,400, now averages out from my STR strategy on average $2,500-$2,750 a month in gross rents. We still need to account for utilities, supplies, and time (self-managing tends to help account for the management fee).
I still come out ahead about another $800-$1,000 month in "passive income" per unit. Now, these are numbers based on average for my portfolio and I am not inferring that it will be like this for everybody. I just needed to emphasize that it is more than a "side hustle" and one can definitely make a living off STR's if they have a market with tourism, the right mindset, and are willing to put some time into the startup process.
Now with my system built right, I manage all my bookings and coordinations simply from my laptop or Iphone. However, I have really good maids and really good communication and it brings me joy sharing my properties with people from all over the world visiting my city. (Also, negotiated the furniture in a couple of my properties as I became more seasoned and that helped cut that startup cost). Hope that helps you understand a little better!
@Julia Bykhovskaia - I appreciate the input and completely agree the higher returns can be worth it for those targeting this approach. Knowing your market (and any STR restrictions) is a major factor to sustained success.
@George Mevawala - Thanks for the in depth response! I can see how having the correct team and systems in place makes all the difference. I work full-time as a general contractor, and after refining my management systems and network of sub-contractors, projects run much more efficiently than when I started out. You bring up an excellent point about knowing the break even point for off-season months, as I think many newer STR investors forget to take that into account. I live in MN, and great STR locations for summer can be extremely hard sells 8+ months of the year. It sounds like you've found a great market and niche, have put in the time and effort, and are reaping the rewards!
Excellent discussion all around!
I've never done a significant STR, but I was just listening to Bill Manaserro's Podcast: Old Dawgs Podcast on the very same subject.
He converted some of his high-turnover efficiency units in Indie into STR, and was trying to figure out how to make that work while living in CA (a problem I have a lot of sympathy for!)
He had, what I thought, was a potentially great solution. He found an organization that specifically looked to find temporary housing spaces for traveling nurses. The thesis was that there is a huge shortage or nurses, and hospitals are hiring short-terms nurses on 90+ day contracts and paying for housing costs as a way to entice them into the area.
So you have a lot fewer turns, and you can still charge a healthy premium over long-term rentals.
I don't currently have any units that fit that profile, but some food for thought, certainly!
Hope that helps.
@James Kojo That is actually what I do with travel nurses. The key to doing Airbnb or short term rentals is to mix the business model of corporate housing with Airbnb. I rent to travel nurses for 3 - 6 months and when it's time for them to move out I'll Airbnb the unit until I get another corporate client. I notice most people fall in love with Airbnb while you can cut back on turnover by switching to corporate rentals and making the same money. If you have a duplex with this business model you can quadruple your cash flow.
Very smart, @Myka Artis ! (Why are there so many smart investors in Texas? :))
Can you share how you manage units? Do you self-manage? Is it a model that you could scale up by adding outside management? If you did, would you have different management for the travel-nurses vs vacationers? If I wanted to convert 20 units out of 200 units into STR, how might that work?
Any insights appreciated!
I use a virtual assistant for most of my management. Most of my units I have staff on site so the turnover is already taken care of. I keep the same management for the travel nurses and vacationers. Most services understand the two business models and they are pretty much identical. I use Guesty for a channel manager and PM system. If you wanted to convert 20 units out of 200 units into STR you may want to look at local laws and taxes. I work out deals with apartment complex owners by showing them my business model and giving them insight on how they can increase their cash flow by renting to me and letting me corporate rent their unit. I do that in the state of Texas because it now saves the apartment complex owner money by not having to pay Hotel Occupancy Taxes. If you wanted to convert the 20 units and still cover the taxes you would just need to look at furniture costs and utility costs. You can get cheap furniture from FB marketplace depending on your area.
We use to short term multiple units in a multifamily building that we lived in. A crazy house hacking situation that was amazing for cash flow, but at times not so great for noise since it was a turn-of-the-century property. We converted the units back to longterm rentals when local regulations got tighter in Portland.
I'm on the fence about converting multifamilies to short term rentals in tight markets where affordability is an issue. On the one hand I am pro-property rights and generally think that short-term rentals can integrate nicely into residential neighborhoods. On the other hand, though, if you look at "affordable" housing choices---single family residences vs. multifamily units---multifamily is the financially economical choice, which is why I think there is a strong argument to make to preserve multifamily for long-term rentals.
As for systemization...yes, you need to treat it like a business and systematize. It is no different than any business that I've been a part of and policies and procedures need to be adhered to and systems put in place. The same goes for finding off-market properties, managing a large portfolio of long-term rentals, and keeping a pipeline full for traditional sales.
I think it depends on the market and the asset class. For our C properties in garden apartments, I don't think it would work as well.
We offer short term rentals on a few of our properties and charge a premium, but we do in house. Our competitors do not offer short term rentals, and we saw a need in the market.
I think Airbnb would definitely work in higher class properties and or areas that have vacation rentals, such as the Smokey Mountains, or St. Augustine where I live.
Thanks for the great question!
@Jake Cohen I would think in light of that the cannabis industry in Denver offers a huge draw for travelers looking for a place to stay making an excellent location for hosting your properties. You could add value by partnering with other companies to create experiences and sell them on Airbnb for even more revenue.
BYT if you need help with financing I would be happy to help you with that. Feel free to DM me if would like to discuss further.
@Keith Linne Yes I read that article it was great stuff....thanks for sharing
@Gino Barbaro thanks so much for your insight
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